401(k) Rollover to IRA

When you change jobs or retire, deciding what you'll do with your 401(k) is important. That's because each of your options may have a different effect on your retirement savings.

  • Continue to save for retirement
  • Avoid unnecessary income taxes and penalties
  • Have flexibility in choosing your investments
  • Make withdrawals from your retirement savings when you need to

Please keep in mind that rolling over assets to an IRA is just one of multiple options for your retirement plan.

Each of the following options is different and has distinct advantages and disadvantages.

  • Roll assets to an IRA
  • Leave assets in your former employer’s plan
  • Move assets to your new/existing employer’s plan
  • ash out or take a lump sum distribution


Options

Benefits

Considerations

Leave the money in
a former employer's plan

  • Continued tax-deferred growth potential
  • May have access to institutional investments at low cost
  • If you separated from service after age 55, may have access to penalty-free withdrawals
  • Generally, plan assets have protection from creditors under federal law
  • Cannot continue to contribute to account
  • May not have access to loans from account
  • Some employers may charge higher plan fees if not an active employee
  • May have limited investment options within plan
  • May have transactional limits
  • May have limited withdrawal options

Roll the money to
a new employer's plan

  • Continued tax-deferred growth potential
  • May have access to institutional investments at low cost
  • May have access to loans
  • Generally, plan assets have protection from creditors under federal law
  • If you plan to continue working after age 55, you may have access to penalty-free withdrawals
  • If planning to work beyond age 70 ½, may be able to delay RMDs
  • May have higher fees than old plan or an IRA
  • May not have access to a wide variety of investment options
  • May have to wait before being able to roll the assets into a new employer plan
  • May have transactional limits

Roll the money
into a Schwab IRA

  • Continued tax-deferred growth potential
  • Potential for a wide variety of investment options
  • Potential for lower fees than in an employer plan account
  • Access to penalty-free withdrawals for qualified first-time home purchase and qualified education expenses
  • IRA provider may offer full brokerage service, investment recommendations, distribution planning and access to securities execution online
  • Consolidation may make tracking assets and performance easier
  • Once an investor reaches age 70 ½, Traditional IRAs require the periodic withdrawal of certain minimum amounts, known as the required minimum distribution (RMD)
  • Potential loss of access to institutional investments
  • IRA assets protected in bankruptcy proceedings only; protection of IRA assets in lawsuits vary by state
  • Highly appreciated employer stock may have less favorable tax consequences

Take the cash value
of the account

  • Immediate access to cash
  • No restriction on investment choices
  • Possible tax savings on company stock through Net Unrealized Appreciation (NUA)
  • Loss of tax-deferred growth potential and retirement savings
  • Employer will withhold 20% to pre-pay federal taxes owed
  • Applicable taxes and potential 10% early withdrawal penalty

Before deciding whether to retain assets in a 401(k) or roll over to an IRA an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock. View the FINRA Investor Alert for additional information.

 

401(k) Rollover to IRA

Rittmann Capital Management makes rolling over an old retirement savings plan from a former employer easy for you.

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