What Are 401K Rollovers
401k Rollovers refers to the transfer of the balance of a 401k to another 401k. Rolling over a 401k from a former employer into a conventional IRA or a 401k. This is usually done when you work for a company and you have a 401k that hasn't been automatically withdrawn, and you work for a new company where you have a new 401k that you want to add the previous 401k to the new 401k.
It’s similar to when someone trades in their old car for a new one. The dealership makes a new contract adding the old balance minus what they are giving you for the old car plus the new cars balance. So for example if you have a used car and your dealership says your car is worth $4000 and your new car will be worth $15,000 an you owe in your old car $6,000 then your new contract will be a total of $17,000 because of your new cars loan plus your old car loan minus what the dealership is willing to give you for it. Therefore a 401k rollover works very similar in comparison.
If you have a 401k from a previous job worth $6000 and in your new 401k from your current job you have $10,000 then you can rollover the balance to the new 401k making the total $16,000. As you can see the idea is pretty basic for anyone to understand. The term rollover might be one of the reasons for some peoples confusion when comes to a 401k rollover.
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