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Many people think that moving retirement assets from one invest account type to another is an overwhelming task. However, this is not the case if you understand all the options that you can avail of.
If you have a 401k retirement account, you can rollover the funds from that account either to an IRA or CD. If you rollover your 401k to a CD (Certificate of Deposit) you are rolling over to funds to the money market. Do not worry. This is a non-qualified low risk account. It is especially designed for investors who want their funds to grow but do not want the risk their monies. When you take the CD option, the funds will be available to you after a certain time period and usually the growth of the money is above the inflation rate.
Here you have to deposit the money for a certain time period and you will get interest on the deposited amount. This interest is pre-defined. However, you can have access to the money only after the maturity date. CDs are usually issued by banks.
The other option of rolling over your 401k funds is into an IRA account. Many people believe that an IRA is the best way of saving taxes and building financial security for the future. You can invest the money into a traditional IRA, Roth IRA or an education IRA.
In a traditional IRA, you will save taxes in the year you contribute to the account. The money grows tax-free. There is a certain age for withdrawal of the funds and when you withdraw, you will have to pay taxes at the tax rate that is present then.
One of best vehicles to save money is the Roth IRA where your contributions to the account are after taxes and as your investment grows, the entire money is tax-free. The good about a Roth IRA is that you will never have to pay taxes again and you can withdraw money whenever you want and not waiting until you reach the age of 70 1/2 years.
An education IRA is for parents who want to save money for their children’s college education. You can save money for your children who are under the age of 18. You contribution to this type of IRA is non-deductible and the maximum you can contribute annually is $2,000 per child. All contributions have to be made before the child turns 18. The contributions to an education IRA is after tax and all withdrawals are tax-free and without penalty as long as you stick to the rules and regulations.
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