You should know what a Rollover IRA is

For the last few weeks we’ve been talking about 401(k)s; who they belong to (you), what vesting is, and how matching works. This week we’re looking at what to do with a left-behind 401(k) account if you’ve left a job where you had one.

There are multiple options (we’ll talk more about these next week) but a simple option that works for almost everyone is a rollover IRA. A rollover IRA is simply an Individual Retirement Account (IRA) that you create by transferring the money from your old 401(k) account. By “rolling over” the money from the 401(k) you avoid the taxes and penalties that would come with simply withdrawing the money. You keep the tax advantages of the traditional 401(k), and you control the investment choices you make in the new account. A direct transfer is a simple way to make sure you’re keeping track of your retirement accounts without complicated deposit and tax rules that could end up costing you money in taxes and penalties. You can read the full story on rollover IRAs here (and stay tuned next week for your other options for old 401(k) accounts).