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You will likely have a few choices: keep your 401k with your old employer (sometimes possible), roll the proceeds into your new employer's 401k plan, or put them directly into a self-directed IRA at a brokerage firm of your choice.

Since leaving your 401k with your ex-employer has no benefits whatsoever and most employers will prefer you transfer out anyway, that leaves only the last two as viable options:

1. Roll your 401k proceeds into a self directed IRA

This is the preferable solution for most people, and with it you again have two choices: roll your 401k into a 'Contributory' or a 'Rollover' IRA.

Contributory IRA:

Once you roll your proceeds into this type of IRA, you may still contribute annually if you qualify (check with your accountant).

In an ideal world you would start your working conversant with a great brigade in your early 20s, steadily inch the corporate ladder, retire at age 65, and draw a sufficient income from your packaged 401k letters to live happily ever after.

Unfortunately, that’s not how the real world works. If you are like most people, you will re-formation careers, or at least companies, several times. Each time, you'll be faced with the question of what to do with your leagued 401k benefits.

You will likely have a few choices: keep your 401k with your old employer (sometimes possible), roll the proceeds into your new employer's 401k plan, or put them directly into a self-directed IRA at a charge firm of your choice.

Since leaving your 401k with your ex-employer has no benefits whatsoever and most employers will prefer you transfer out anyway, that leaves only the last two as viable options:

1. Roll your 401k proceeds into the new employer's 401k plan of (if allowed)

This is the most painless solution and the one that does not require much decision making. While this is necessarily acceptable, there is a bigger picture.

The ultimate goal of having a 401k plan is to provide you with a suitable retirement. To get in this you really need a wide variety of investment choices and the opportunity to move them in response to market variations.

Most 401ks are limited to maybe 15 mutual fund choices which rarely change, even if market behavior dictates they should. Additionally, the sloppy word provided through plan sponsors is generally not terribly useful.

The only gain to this type of rollover is that if your plan has a loan provision, you’ll be able to adopt funds easily.

2. Roll your 401k proceeds into a self directed IRA

This is the preferable solution for most people, and with it you and so have two choices: roll your 401k into a “Contributory” or a “Rollover” IRA.

Contributory IRA:

Once you roll your proceeds into this type of IRA, you may still contribute annually if you qualify (check with your accountant). However, the 401k portion can no longer be rolled back into contributory 401k with a new employer, should you ever want to do that. So you eliminate the possibility of using the loan provision with those funds. While it is possible to extort vis-a-vis an IRA, it’s more limited than appropriation toward an employer 401k. deformity with your tax preparer for details.

Rollover IRA:

This type of IRA allows you the most flexibility. You may roll the proceeds back into a 401k plan if you want to utilize a loan provision. However, for tax reasons you should not make album contributions to this IRA. If making album contributions becomes important to you, simply open other contributory IRA.

Since Rollover IRAs are usually set up at a retailing firm, you’ll have wheeler-dealer to their entire universe of mutual funds. With this type of IRA, you can also employ an independent investment consultant to manage the tally for you. (Yes there is a cost for that, but an effective teacher will more than make up for that in greater returns than you would get without him or her.)

Most of my clients have found that the investment results we've obtained with their personal IRAs were far superior to those yielded by their employer 401k plans or their personal investing efforts. This has been mainly due to a collocation of above choices and a methodical analogy to investing which has kept my clients in the market during good times and out of it unreservedly during severe declines.

Bottom line: Rollover IRAs offer opportunities to maximize benefits and provide flexibility not usually off with employer 401k plans.

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