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Thinking About Rolling Your 401K Plan into an IRA?

As more people are experiencing losses in their 401K plans, many are wondering if they would do better to roll that money into an IRA. Many financial experts believe rolling a 401K plan into an IRA helps maximize your returns – especially during a period when you've been losing money due to the declining economy. If you are thinking about moving your 401K funds into an IRA, here are the four things you must consider to help you make the decision to change:

401K Plans are Controlled By Your Employer

What many people don't realize is that 401K plans are controlled by your employer. They're going to select investment venues that will benefit the company – and probably benefit the company more than it benefits the individual investors. Many people decide to move their 401K money into an IRA simply because they want to choose their own investments and have more control in order to maximize their returns.

IRAs Give Varied Investment Options

A 401K plan is limited to stocks and mutual funds which are chosen by the employer running the plan. If you open a self-directed IRA, you have more options as far as what you might invest in. Self-directed IRAs allow investments in real estate, business partnerships or franchises, gas and oil fields, tax liens, and private equity among others. If you're not big on the idea of having to follow the market to make wise investment decisions, the fixed-rate IRA allows you to earn a guaranteed return on your investment, without the risk of losing your contributions.

More Opportunities to Maximize Your Return with IRAs

Many people move their 401K retirement funds into an IRA in order to invest in real estate. If you're new to investing in real estate, it would be wise to find financial advisors or companies that specialize in real estate investing to help you. Some companies will guarantee that you double your returns (or they'll pay you the difference); which helps eliminate your risks. If you're looking to study self-directed IRA options yourself in order to make all your own investment decisions, you might roll your 401K funds into a fixed-rate IRA while you're studying, to ensure you don't lose any more money than you already have.

IRAs Put You in the Driver's Seat

There are a few 401K plans that are labeled “self-directed”, but they are not as flexible as a self-directed IRA. Many employers offering a self-directed 401K plan only allow a portion of all of your investments to be self-directed. Even self-directed 401K plans allow the employer to change companies or investment options whenever they want – and you don't have any say in the matter. When you save for retirement in self-directed IRAs, you can make decisions regarding your investments at any time, with help from the account custodian you've selected.

Most people find they are able to maximize their investment returns by rolling their standard 401K plan into an IRA. Whether you roll your retirement fund into a self-directed IRA that enables more variety investments, or a fixed-rate IRA that guarantees you won't lose your contribution – IRAs offer more flexibility and control over your retirement fund.