How to Transfer a 401k to an IRA

Your 401k account is one of your best retirement savings tools with employer matching and the potential for huge tax savings.There are some major drawbacks to a 401k plan and you’ll get more control over your money when you transfer a 401k into an IRA.

Why Transfer a 401k to an IRA

You may be facing one of these reasons to transfer a 401k to an IRA.

  • You may want to rollover old 401k plans into one large IRA in order to make it easier to track your retirement savings. If you change jobs every five to ten years, combining your old 401k plans into an IRA will make keeping track of retirement savings much easier.
  • Your 401k provider is closing your account. If you do not have a minimum amount in your account, your provider can cash out your 401k and send you the proceeds. You can avoid taxes and penalties by moving this into an IRA.
  • You may want more control and additional IRA investment options that you cannot receive through your 401k, since your employer choose the investment company and then you choose from a list of additional options. With an IRA, you have more control over the type of investments and companies you use.

Eligibility for 401k Transfers

In order to be eligible to rollover your 401k, you must no longer work from the employer that has your 401k. You will become eligible to do this when you change jobs. If you are still working for the company and make contributions, you must leave the account open. However, this allows you to take full advantage of any employer contributions that you are eligible for through your benefits.

Types of Self-Directed IRAs

There are two basic types of IRAs. Generally, you will roll your IRA into one of these two IRA classes.

  • Traditional IRA: A traditional IRA will offer a tax break on your contributions. You will pay the taxes when you make withdrawals on the account.
  • Roth IRA: A Roth IRA makes you pay taxes on your contributions, but you will not pay any taxes on the money you withdraw. This option offers you the most tax savings over your lifetime, as taxes in the United States are expected to rise dramatically.

Choosing an IRA Provider for Your 401k Transfer

Once you have determined that you want to transfer your 401k, you will need to find a provider that offers IRAs. The type of provider you choose will determine the type of investments that you have available to you. There are three basic types of providers.

Traditional Investment Firms
A traditional investment firm will allow you to open an IRA. You have the option of choosing between different types of stocks, mutual funds, and CDs, depending on the amount of risk that you are willing to take.

transfer a 401k to an IRA retirement planPros:

  • Easy to make the investment
  • Wide variety of investment options
  • Good option for someone who does not understand or study the markets closely


  • Little control over your investments
  • Annual fees may be high

Banks and Credit Unions
Banks and credit unions will allow you to invest in Certificates of Deposit (CDs), when you open an IRA with them. The investments are guaranteed up to $250,000. This offers more security, but it does limit the type of investments you are allowed.


  • Guaranteed funds
  • Good option if you are nearing retirement age


  • Low interest rate that makes it difficult to keep up with inflation
  • Limited investment options

Alternative Asset IRAs
Alternative asset IRA custodians are known for their willingness to hold assets like gold, silver, real estate, art and even businesses under the IRA umbrella. You control your investments, but they must be stored by an independent third-party to qualify as IRA investments. You are not allowed to purchase the investments from yourself or live in any property that you own, and you cannot purchase the investments with non-IRA cash and then deposit the assets into your IRA.


  • Flexibility with investments
  • Ability to really diversify your investments
  • More control over your account


  • Strict guidelines over transactions
  • Need a firm understanding of the market and your own goals

Transferring Your 401k to an IRA

When you are ready to transfer your inactive 401k to an IRA, give Janguard a call because our non-commissioned IRA advisers can walk you through the transfer process. In just a few minutes we can help you set a course for personal financial freedom via a self-directed IRA. Call Janguard today at 1.800.571.6341 and let us help you “Secure Your Independence.”