If you have a 401(k) account and have recently left your job or been laid off, you may be wondering what to do with your retirement investments. But even if you’ve left your employer for a while and still have a retirement account there, you have several options when it comes to finding the best place to roll over your old 401(k):
Brokers:
An online broker is a great option if you want to “do it yourself” and use your investment expertise.
Robo-advisors:
A robo-advisor is an excellent choice if you want someone to manage your money at a low overall cost. Robo-advisors often add numerous other valuable features like tax-loss harvesting.
Top Online Brokers for 401(k) Rollovers:
Charles Schwab:
Charles Schwab excels in every category and serves a wide range of customers from beginners to experts. If you’re looking to buy the same mutual funds you held in your 401(k) account or purchase some of Schwab’s cheaper alternative funds, the broker likely offers that with thousands of funds that have no transaction fees.
Wealthfront:
Wealthfront is an excellent choice if you’re looking for someone to manage your rollover to an IRA. This robo-advisor can create an investment portfolio based on the risk you’re comfortable with and when you will need the money exactly. You’ll receive automatic rebalancing to keep your investments aligned with your goals, and you will also pay reasonable fees for the funds you invest in.
E-Trade:
E-Trade is a great general broker, but it likely stands out for its extensive research, which can be particularly valuable for new investors or those without another source for research. If you need a fully integrated mobile app, the broker covers you with its Power E-Trade platform, although it also handles all the basics well. The broker has eliminated commissions on mutual funds, making it one of the best brokers for long-term investors. Additionally, ETF and stock trading is commission-free, as is standard with online brokers.
Fidelity Investments:
Fidelity is an exceptional broker in nearly every aspect, but it is especially great for beginners or those seeking superior customer service. Fidelity representatives respond quickly to your inquiries, which is a huge advantage for those of us who don’t deal with investments and retirement daily.
Betterment:
Betterment is one of the largest and most popular robo-advisors, and it can take your 401(k) rollover and build a balanced retirement portfolio. Betterment uses funds from 13 different asset classes to build its portfolios and offers a wide range of diverse investments. Additionally, if you are interested in socially responsible investing, Betterment can incorporate these funds into your portfolio.
Firstrade:
Firstrade has increased its offering of commission-free mutual funds in recent years and now offers more than 11,000 such mutual funds. The broker provides access to robust fund research and an advanced screening tool that should help you identify the mutual funds that meet your needs. You will also benefit from free trades on stocks and ETFs.
Interactive Brokers:
Interactive Brokers is suitable for active traders and professionals, but it can also work for retiree investors and beginners. Although trades are not free unless you use the broker’s IBKR Lite pricing plan, they are still affordable at half a cent per share, with a minimum trade of one dollar. The broker also offers competitive pricing for mutual fund trades, but its list of no-transaction-fee funds is the largest in the industry.
Merrill
Edge:
Merrill Edge is generally a good choice, as it offers a full range of brokerage services. However, it is a particularly great choice if you are already a client of its parent company, Bank of America. This is because you can access all your accounts in one place and make quick transfers between your bank account and your brokerage accounts. Additionally, you can access Merrill representatives at many Bank of America locations.
Schwab Intelligent Portfolios:
Don’t confuse Schwab’s self-directed brokerage with the robo-advisor Schwab Intelligent Portfolios. Regardless of the method you choose, Schwab brings its friendly spirit to investors. The main news about this robo-advisor is that it does not charge management fees to build and run your portfolio. How does it make money then? By investing your money in its internal funds, which still rank among the cheapest funds available in the market.
Vanguard:
Vanguard represents a groundbreaking option for retirement investing, paving the way for low-cost retirement investors everywhere. Vanguard not only charges $0 fees on stock and ETF trades, but the entire Vanguard family of mutual funds is free (and free even if you need a broker’s help to execute a trade), while the company offers discounts on trades in other fund companies at $0 as well if they are on the no-transaction-fee list. Otherwise, commissions would be between $8 and $20 per trade, although customers who have more than a million dollars in Vanguard funds will receive their first 25 trades for free.
What to Consider When Choosing a Broker:
If you plan to roll over your 401(k) to an IRA, you’re likely most interested in a broker that can do the following things better. Most brokers offer IRAs, but some well-known brokers do not, although all of the brokers mentioned above do offer IRAs. We also considered the following factors when selecting the best places to rollover your 401(k):
Cost:
Trading commissions on stocks and ETFs have dropped to $0 at most online brokers, which is great for investors. But there are other costs as well, and perhaps the most prominent are account fees, such as fees for transferring from your account.
Transaction-Free Mutual Funds:
The brokers on the list above offer thousands of transaction-free mutual funds. If you’re rolling over your 401(k) and love the mutual funds you already have, these brokers may allow you to buy and sell the same fund without fees.
Investment Strategy:
While a 401(k) account may limit your investment options to a predefined set of mutual funds, an IRA gives you the ability to invest in almost anything tradable on the market. Therefore, we considered how each broker could fit investor needs.
What Are Your Options for the Rollover?
Generally, once you leave a job, you have three options for how to handle the retirement plan offered by your employer:
1. Leave it in your former employer’s 401(k) plan: This approach requires the least amount of work, but you may be required to have a minimum amount (often $5,000) if you plan to keep the account there.
2. Roll it over to your new employer’s 401(k) plan: This approach will require you to submit some paperwork, but you will have all your 401(k) funds in one place. This option can be convenient if you like your new employer’s plan.
3.
Converting to an IRA: This option will require you to submit some paperwork, but after that, you will have complete freedom to invest the money as you see fit. If you liked the investment options (like mutual funds) you had in a previous plan, you might still be able to access them through an IRA.
(If you run a self-employed business and have set up an individual 401(k) plan, this is another option for conversion. However, this option is not typical for most individuals.)
If you convert your 401(k) to an IRA, you will also want to consider what type of conversion you need.
If you have a Roth 401(k), you are likely more interested in a Roth IRA, so you can take advantage of the significant benefits of this plan.
If you have a traditional 401(k), you will likely choose a traditional IRA.
(Here are the main differences between a Roth IRA and a traditional IRA.)
Source: https://www.aol.com/best-places-roll-over-401-041141227.html
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