You should consider a number of factors before rolling over your 401(k).
You are planning to retire before you turn 59 ½.
This means you are planning to retire early.
What do you need to consider financially to make this happen?
For some insights we turn to a recent Forbes article that asks “Should I Roll My Old 401(k) To An IRA If I Want To Retire Early?”
You could limit your withdrawal options.
With very limited exceptions, if you make withdrawals from a traditional IRA before you turn 59½ there is a 10 percent penalty.
However, the IRS lets employees make withdrawals without penalty from their company 401(k) if they leave the company at age 55 or older.
If you were to retire at 55 and rolled over your 401(k), then you would need to wait 4½ years to withdraw your funds and avoid a penalty.
With traditional 401(k) or IRA, you will pay income taxes on any withdrawals.
Your money was not taxed when you made the contributions and it has grown tax deferred.
The IRS will then collect taxes on your money later when you make withdrawals at ordinary income rates.
Alternatively, are there other reasons to keep your 401(k)?
It will simplify your investments and keep them safe.
If you qualify for a Roth IRA, you could use a "backdoor" Roth IRA.
This should not be attempted without the help of a tax or financial advisor.
Financial planning for retirement should not be taken lightly at any stage.
If you are nearing retirement, you should be especially wise with your money.
Working with an experienced estate planning attorney and financial planner can help you make the right choices for your specific circumstances.
Reference: Forbes (August 31, 2018) “Should I Roll My Old 401(k) To An IRA If I Want To Retire Early?”