With the new year here, you’d be far from alone if your thoughts drifted from the joy of the holidays to more practical things, like your retirement accounts. The start of a new year is a bit of a traditional time to think about the future—and hopefully that includes your retirement. Of course, odds are you’re not retiring in the next year, but it is never too early to start planning. One of the biggest issues we’re used to hearing about retirement accounts concerns rolling over a 401(k) into an IRA. There are some great perks to be had, but there can also be some tricky steps, so let’s take a moment to discuss the “whys” and “hows” of rolling over.

The “why” part of rolling over into an IRA

When you leave a job with a 401(k) intact, you have numerous options as to what you can do with your money, and many people have found that rolling it into an IRA makes sense for several reasons: Although cost comparisons depend on employers’ investment offerings, IRA plans typically offer cheaper investments along with a more diverse investment selection. Additionally, IRAs offer cheaper account fees. Sure, some 401(k) plans pass their fees along to the employer, but many IRAs charge no account fees whatsoever. Other benefits include cash incentives, fewer rules, and even estate planning advantages.

All that said, leaving your money in a 401(k) has its benefits as well, including the fact that funds in a 401(k) are better protected from creditors. Additionally, with a 401(k) it’s possible to take a loan, which is generally far more difficult with an IRA. We recommend speaking with a financial advisor to help you decide whether rolling over your 401(k) into an IRA is the right decision for you.

The ”how” part of rolling over into an IRA

So, if you’ve come to an educated decision that rolling over your 401(k) into an IRA is right for you, it’s important to know that there’s a right way and a wrong way to do it. Walking away from a former job with a check in your name, or simply cashing out your balance, could leave you owing as much as a third of your balance to the good old IRS. So be careful out there.

Following these four steps can help you roll over and keep all your hard-earned money for your retirement:

1. Decide whether a Roth or a traditional IRA is right for you

Unless you’re rolling from a Roth 401(k) into an IRA, rolling over any other type of 401(k) will leave you liable for taxes on the rolled amount. So, if you want to avoid the taxes, a traditional IRA is your best choice.

2. Choose a provider and open a rollover IRA account

Once you’ve chosen a provider and provided some basic information, opening a rollover IRA account is fast and easy.

3. Have your 401(k) plan provide a “direct rollover”

This is a big one. Using the specific words “direct rollover” ensures that your plan will create a check made out directly to your new IRA account, rather than to you personally. This is key to making sure no taxes apply.

4. Choose your investments (wisely)

Of course, carefully selecting your investments is key to success, but simply choosing is key to avoiding fees and taxes. Your funds will arrive as cash so you can either pick your investments and manage them yourself or select a provider to do it all for you.

Finally, if you’ve read all the way to the conclusion here, then it probably means you’re starting your year right by thinking about your future. Congratulations. Consider it a good start on your New Year’s resolutions. Should you decide that rolling your 401(k) over into an IRA is the right idea for you, be sure to do it right, do it carefully, and do it with the help of a knowledgeable team member at your local credit union. And that’s a great way to have a Happy New Year!