Tax-Deferred Status

• If you simply take the money out of your 401k plan when you leave your job, you could be subject to a 20 percent tax penalty on the money you withdraw, as well as ordinary income taxes on everything you took out. Rolling the money into an IRA preserves the tax-deferred status of the account and lets you avoid those fees and penalties.
  
  

Investment Opportunities

• When you invest in a 401k plan, chances are you are limited to a handful of mutual funds. The typical 401k plan includes a number of stock mutual funds, perhaps a few bond funds and a stable value or money market fund. But when you roll the money in your 401k plan to an IRA, you can get access to literally thousands of different mutual funds, as well as individual stocks if you open your account with a brokerage firm. This flexibility can help you grow your wealth faster and make the most of the money in your retirement program.
  
  

Lower Costs

• Investing in a 401k plan can be a valuable way to save for retirement, but many plans are burdened by high fees and poorly performing funds. Rolling the money in your 401k over to an IRA that you control allows you to choose lower-cost investments that also may perform better than the ones you had been using. These lower costs can translate into higher returns over time, boosting the value of your retirement nest egg and allowing you to enjoy a more financially rewarding post-work lifestyle.
  
  

Easy to Do

• Rolling your 401k money into an IRA is not as difficult as you might think. In most cases, all you need to do is complete a transfer form that includes information on the current 401k plan, including the name of the administrator and the approximate balance. After that information is recorded, you submit it to the company you want to use for the IRA, and it takes care of the rest. The money is rolled directly from the 401k plan to the IRA, preserving the tax-deferred status and allowing you to continue saving for the future.