When it comes to making an appropriate decision about your 401k rollovers, make sure you carefully investigate the relationship between the different ways you can set up a rollover. If you are leaving one company, you obviously can’t leave your 401k behind you with them (and, considering that you might have a fair bit of cash in there, you wouldn’t want to, anyway). If you are entering employment with another company, you can always make use of 401k rollovers by passing the cash into your new 401(k) plan. If you aren’t planning on pulling the funds out anytime soon, it might be worth it.

That’s actually a crucial part when considering a rollover plan: when you intend to take the funds out. Rolling your 401(k) over into an IRA (individual retirement account) is a great option if you only intend to take the cash out at retirement—however, if you anticipate a need for the funds any time before that, an IRA is going to hit you with the 10% penalty plus the income taxes no matter how close or far you are to or from retirement. On the other hand, leaving the money in your 401(k) allows you, under some 401(k) plans, to borrow against the sum.

Now, granted, borrowing against that sum means that you have to pay yourself back—with interest—but some view it as a safer option than taking out a standard loan from a bank. The key point when dealing with that kind of borrowing is the getting down into the details of what exactly is going to happen with the funds. You need to know what your 401(k) provider allows, especially as it pertains to borrowing, before you decide where to send your rollover. If you’re intent on angling your 401k rollovers toward an IRA, make sure that you are willing to shoulder the burden of a standard loan if ever you should need one. Otherwise, you’ll be facing the IRA withdrawal penalties instead of the option of borrowing against your 401(k).

In today’s economy, 401k rollovers are an interesting option. See, the issue with these rollovers is, as we’ve pointed out, where to roll them. Many people look at IRAs because of the diversity of investment options. And it’s true; because 401(k) plans deal only with limited investment funds (because of their often inherently corporate nature), they lack the diversity that can provide rapid growth. Nevertheless, they do still tend to grow at least at the rate of inflation, making them relatively stable. But then back on the other hand, 401k rollovers into IRAs do have that attractive diversification point. Remembering that you should have a decent assessment of your financial future (concerning potential upcoming needs for loans), an IRA is still a viable option for a rollover.

Ultimately, when assessing 401k rollovers, you need to look at both sides of the coin. On the one hand, rolling over into 401(k)s provides stability; on the other, IRAs can be an attractive investment option. Weigh your options and know what you want before you act.