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Should I rollover my 401(k) to an IRA?
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New York -  We generally prefer 401(k)s be rolled over into an IRA because IRA provide a wide range of investment choices than are probably offered through your 401(k) plan. You would have the option of purchasing stocks, bonds and mutual funds that are not offered in your 401(k) plan.  In addition, because mutual funds charge management fees that are factored into the total return of funds offered in retirement plans - you may be able to achieve a higher return investing in a rollover IRA. Here the considerations you should make:

How easy will it be to access my plan money when I need it? Some employers' plans restrict the timing and amount of withdrawals. In addition, they may not offer the check writing or withdrawal services available through other alternatives.

Will my employer help me comply with IRS minimum required distribution (MRD) regulations? At age 70 1/2 the IRS usually requires you to begin taking distributions from your retirement plan. Make sure your employer's plan helps you calculate the minimum distribution and offers automatic withdrawal options to help you meet these minimums. The IRS allows a number of options under which you can calculate your MRD. You should also make sure that the plan allows you to select the method that is most advantageous to your situation.

What investment options will I have? As a retiree, you may be thinking about a wider range of investment options than those offered by your employer's plan. You may want to invest in a broader range of conservative investments like CDs or U.S. Treasuries, or more diverse growth vehicles like stocks or growth mutual funds. If these additional options are important to you, and since some stock plans limit the investment options available, you may want to consider an alternative to leaving the money in your employer-sponsored plan. If you rollover your 401(k) plan into one of our managed IRA accounts, you will have access to a professional financial adviser.

Can I keep the same investment options if I leave the plan? While most plan investment options are also available in a Rollover IRA, your plan may offer some options unique to employer plans, including GICs, managed pools, and special pricing arrangements for your company stock.

Will I lose any of the plan options I have now? As a retiree, you may not have access to all the options currently employed plan participants enjoy. For example, you may not be able to take loans against your money.

What about my after-tax contributions? If you have made after-tax contributions to your plan, leaving them in the plan will allow them to continue to grow on a tax-deferred basis, or you can withdraw after-tax contributions, however you will be subject to some tax consequences. While you cannot roll these assets to a Rollover IRA, you can roll over the earnings, as long as you are rolling over your entire account.

What fees will I be charged? Some plans charge participants who are no longer actively employed for services they previously received for free. On the other hand, some IRAs or Income Annuities may also charge a fee, so your cost may be less if you stay in the plan.

Are there any other advantages to staying in my employer's plan? Many employers encourage continued participation of retirees by offering special communications, workshops, and regular meetings. By staying in the plan, you maintain a relationship with your former employer. Also, under Federal regulations, any assets held in an employer-sponsored plan are protected from the claims of creditors (except for the claims of a spouse or child under QDROs). Many states provide for similar protection, but laws vary by state. There may be special tax treatments available to you if you receive your account balance in a lump sum from your 401(k) plan that aren't available through an IRA. If you own stock in your company and hold it in your 401(k) it is possible that you qualify for certain tax advantages. So, prior to making your decision, review your situation with a tax advisor to assist in determining which might be the best way for you to handle your account.

As you make plans to leave a company, check with your Benefits Office to see how the change might affect your retirement plan options. Check with your plan sponsor to get detailed information about fees and expenses or your IRA custodian regarding maintenance fees.

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A Rollover IRA allows you to purchase individual stocks and avoid the fees associated with your 401(k) plan. 


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