The Pros and Cons of Rolling over Your 401K

 There are several options available to retirees as far as their funds are concerned. One of the most popular options is to roll over a 401k into an IRA after retirement. However, the popular choice is not always the best choice. Be sure to think carefully about the pros and cons of rolling over your 401k before you make any decisions about your retirement fund.

Pro: Investment Options

One of the greatest reasons to roll over your 401k into an IRA is the potential for a wider variety of investment options. Investment options in 401k plans tend to be fairly limited while IRA's, with few exceptions, often allow for the purchase of stocks, bonds, REITs, annuities, and many other kinds of investments. Rolling over your 401k may just give you the freedom you need to really start making your money work for you, and deserves consideration for this reason alone. You should be able to use your money they way you want.

Con: Liquidation of Investments
Rolling over may have negative implications for your investments as well, however. It is not uncommon for 401k accounts to require a liquidation of all investments made within the account before rolling over. Depending on the status of your particular 401k plan portfolio, this may or may not be a prudent decision. You may not be able to recreate your portfolio in a new account, so this liquidation has the potential to amount to a loss for you. Think carefully about this implication to your retirement fund before rolling over your account.

Pro: Simplicity and Security
You don't want to have to worry about your money. IRAs offer a great amount of convenience and simplicity by allowing investors to consolidate their funds into the fewest accounts possible, making things much less complicated for you. An IRA can also offer great protection from creditors--up to one million dollars in secured funds that cannot be touched by creditors in most cases. Keeping your money protected in the event of a financial crisis is an important consideration, and an IRA may be your best bet in terms of convenience and security for your peace of mind.

Con: No Protection from Lawsuits
While an IRA may offer you protection from creditors, your money may still be vulnerable in other ways. 401k plans offer their own kind of security. For example, the money in your 401k is protected from the collection after lawsuits under federal law. The 401k contribution limits 2013 brings may not offer you the potential for growth that you want, but you will be able to rest easy knowing your money can't be snatched away by relentless litigators. IRAs are usually protected under state law, but the implications of this disparity in protection may be enough to tip the scales.

It will be important to consider both sides of the coin when you decide whether or not to roll over your 401k. There is a down for every up, so make sure you look at all sides of the issue before making a decision. What's right for most may not be right for you.