Should I Roll Over My Dormant Traditional 401(K)?

You may have a dormant 401(k) plan from a former employer and may be wondering whether or not you should roll it over into an IRA. To help you with this decision, we’ve created the “Should I Roll Over My Dormant Traditional 401(k)?” flowchart.

This flowchart outlines important factors you should consider before deciding whether or not to roll over your 401(k) into an IRA. It covers common features and differences between IRAs and 401(k)s, age-based distribution options, net unrealized appreciation options, taxes and penalties, the impact of a rollover on loans, hardship withdrawals, and substantially equal periodic payments.

It’s important to understand that each of these factors could impact your decision to roll over your 401(k). For example, net unrealized appreciation options may be more beneficial in a 401(k) plan, while age-based distribution options may be more favorable in an IRA. Understanding the nuances of these options will help you make an informed decision that’s tailored to your unique financial situation.

Additionally, taxes and penalties can play a significant role in the decision to roll over your 401(k). Rolling over your funds into an IRA may trigger taxes and penalties that would not apply if you left your funds in the 401(k) plan. It’s important to consider the tax implications of a rollover and determine if it makes sense for your financial situation.

Ultimately, the decision to roll over your dormant traditional 401(k) into an IRA should be based on a thorough analysis of your unique financial situation. The “Should I Roll Over My Dormant Traditional 401(k)?” flowchart will help you identify important factors to consider and determine the best course of action for your specific needs.

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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.