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Many employers also match some of the employees contributions.
However, complications can arise when you switch jobs.
What happens to the money in your 401(k) account?
Learn how IRA rollovers work toavoid this costly mistake.
How Do IRA Rollovers Work?
You, the account owner, are solely responsible for managing your retirement savings.
Your retirement savings in a 401(k) are automatically funneled toward investments that help them grow.
By law, IRA accounts must direct most rollovers and all direct contributions into a cash balance.
Its the default option.
Your money wont go directly into any investments like with a 401(k) plan.
By contrast, cash typically earns little to no interest.
If you leave your IRA rollover in cash, youre missing out on significant potential returns.
Say you have $10,000 in a 401(k) account.
You switch jobs, roll over your 401(k) money into an IRA and do nothing.
If you had immediately invested that money in your IRA, it could have grown.
How To Avoid This Mistake
see to it you dont miss out onpotential investment gains.
Check your IRA to see whether your money is being invested.
If your IRA funds are in cash, nows the time to go for the investment options you prefer.
you’re able to invest your savings in securities likestocks, mutual funds and bonds.
If youre not sure where to start, a target-date fund might be the best option.
Target-date funds are long-term investments that are designed to suit aspecific retirement date.
These funds often contain stocks, bonds and other securities.
The mix generally gets more bond-heavy as your retirement date approaches to reduce your risk.
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