Three Reasons Why You Should Convert Your 401K To A Roth IRA Retirement Account

When it comes to saving for retirement, it can be a bit difficult to choose the right investment plan to help make all your retirement goals a reality. While most employees have some form of employer sponsored retirement plan, there are actually other investment options available on the market that may better suit the employee’s retirement needs. One of these plans is the Roth IRA, and there is much talk about whether or not you should consider rolling your existing 401K retirement funds into one of these alternative retirement investment plans. Here are a few of the most common reasons why you should consider converting your 401K to a Roth IRA when it comes to achieving your retirement savings goals.

One of the biggest advantages of a Roth IRA is that there is no set age requirement on when you need to start withdrawing funds from the plan. With a 401K, you are required by the plan to start withdrawing the minimum amount of money from the 401K once you turn 70 and a half. If you do not withdraw the minimum amount, you will be charged a 50% penalty of the minimum distribution amount. The same process applies for Traditional IRAs as well. While this may be fine if you know you will need the funds when you reach retirement age, it can be a hindrance, especially if you expect to not need those funds until much later in life, or you had plans to leave the funds to your children. Regardless of your reason, the last thing you want is to have someone else tell you what you must do with your money. Before investing in an IRA, make sure to check these helpful resources.

While all retirement plans come with a 10% penalty should you choose to withdraw funds before you reach the minimum withdrawal age of 59 and a half, a Roth IRA actually gives plan participants the option to withdraw a certain amount of money from the plan to cover higher education expenses. These funds will not be charged with a penalty, and must be used for education expenses for the plan owner, their children or their grandchildren. A 401K may also allow you to withdraw funds for education expenses, but there is a good chance you will be charged the 10% penalty in order to do so.

Lastly, a Roth IRA give the plan participant the option to name a beneficiary for their funds in the event of their death and the plan still has a balance of funds left. With a 401K you do not have an option to name a beneficiary. If you happen to pass prematurely, the funds are lost, never to be used by anyone else. A Roth IRA gives the beneficiary access to any remaining funds, and while they may be required to take forced distributions from the plan, they will not have to pay any income taxes on the funds they receive, and they may be exempt from paying any estate taxes on the funds should the balance be under the exemption amount.

These are just a few of the reasons why you should consider converting your 401K to a Roth IRA. With age requirements of when you need to start taking distributions, and the ability to leave the funds to a beneficiary in the event of an early death, a Roth IRA is sure to help you meet all your retirement savings goals, ensuring you will have the chance to enjoy a life that is relaxing and stress free.