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What You Need to Know About Rolling Your 401k to an IRA

rolling your 401kWhen you change jobs, everything you need to take with you can be neatly packed into a box – except your retirement plan.  When you leave your job, you need to think about rolling your 401(k) into an IRA (Individual Retirement Account). If you left your job to make aliya, this question becomes even more crucial, as cross-border financial regulations come into play with keeping the tax-beneficial status of American retirement accounts.

What are your options?

If you leave your American job to move to Israel, you have four options for your 401(k):

* Keep the money with your former employer’s 401(k) plan,

* Roll your funds into an IRA,

* Roll your money into your new employer’s plan if it’s allowed,

* Cash out your 401(k) plan by withdrawing all your money (not recommended).

The best course of action depends on your financial situation, your attitude about managing your own retirement funds, where you will live, and the specific plan options available to you. What are the pros and cons of rolling your 401(k) plan into an IRA?

Advantages of an IRA Rollover

There are several reasons why rolling your 401(k) into an IRA may be advantageous. An IRA gives you more control over your specific investments, as they tend to offer more investment options than a typical 401(k) plan. Furthermore, you can easily manage an IRA from overseas.

 Disadvantages of an IRA Rollover

If you want access to your retirement funds before age 59½, you may prefer to keep your funds in your 401(k) or roll them into your new employer’s 401(k) plan (if available). If you are younger, you might want to take advantage of the fact that 401(k) withdrawals are allowed at age 55. Or, if you are happy with your current investments, it may be better to leave them where they are rather than rolling them over to somewhere else.

Before changing any retirement plan, make sure to consult with a financial advisor and tax professional to understand the tax consequences of any move you make. To learn more about IRAs, click here.


Douglas Goldstein, CFP®, investment advisor, is the co-author with Grandmaster Susan Polgar of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing and director of Profile Investment Services, Ltd. which specializes in cross border investing and financial planning.

Profile Perspectives is a personal finance blog based on articles Doug Goldstein, CFP®, director of Profile Investment Services, Ltd., published in The Jerusalem Post. The information posted is purely informational and does not constitute investment or tax advice. Advertisements on the site are neither endorsements nor recommendations. Consult your professional advisors before making any investments based on articles or advertisements. Securities offered through Portfolio Resources Group, Inc., member of FINRA, SIPC, MSRB, FSI. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation.

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