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Responsible Retirement Rollovers

Top 5 Considerations for Responsible Retirement Rollovers

Top 5 Considerations for Responsible Retirement Rollovers

Retirement rollovers usually happen when an employee leaves their current job. You have the option of rolling your existing 401(k) or 403(b) into another employer-sponsored plan at the new company, or you can choose to rollover the balance into an individual retirement account, or IRA.

Which choice is best for you depends on a few factors. For example, how long are you planning to work? Will you need retirement income distributions before age 59 ½? There are also differences in cost, flexibility, and investment options between IRAs and company-sponsored plans. Here we’ll help you evaluate the top 5 considerations for responsible retirement rollovers.

1. How Long Will You Work?
If you don’t plan to work past retirement age, rolling over your 401(k) to an IRA will not affect you adversely. You will simply start taking distributions when you’re ready, after the age of 59 ½. However, if you think you will work well into your seventies, you must take required minimum distributions from your IRA. With an employer-sponsored plan, you don’t have to take distributions if you’re still working.

For your IRA, the rules specify that you have to receive the first required minimum distribution, or RMD, by April 1st the year after you turn 72. These minimum distributions can help pay for expenses, especially if you’re only working part-time. But if you still receive your full income, you need to think about how the minimum distributions affect your tax obligations.

2. The Need for Flexibility
One advantage IRAs have over company-sponsored retirement plans is the myriad of investment options and flexibility. You don’t have to worry about administrative delays with a managed IRA, whereas your employer-sponsored plan may not let you make changes as often as you’d like. An IRA also offers more investment options most employer-sponsored plans simply don’t have.

3. How Much Does It Cost?
Nothing is free, not even your retirement plan. It’s important to compare the expenses and fund selection offered between a managed IRA and your company retirement plan. Some plans charge a flat fee, others will charge a percentage of your investment holdings. There are pros and cons to both approaches.

An IRA may charge higher fees than an employer-sponsored plan. However, there is usually a greater selection of funds and flexibility for you. A managed IRA also provides you with a financial advisor who can offer personalized attention and assist you with all your investment needs.

4. Early Withdrawal Penalties
When you set up a retirement account, you need to think about early withdrawal penalties. Ideally, you’ll contribute to your retirement fund and wait to receive distributions until you’ve reached retirement age. Once you reach age 59 ½, you can take cash out of your employer-sponsored plan and your IRA without worrying about a penalty.

If you cash out your IRA before age 59 ½, you will pay a 10% penalty on those earnings on top of the regular income tax. There is an exception for employer-sponsored plans that allows employees to receive distributions after age 55 if they meet certain requirements.

If you are over the age of 55 and you leave your current job, either to retire early or to work somewhere else, you can withdraw from that employer’s retirement account without paying the 10% penalty. Some retirement plans also allow hardship withdrawals, where they waive the 10% fee. You may qualify for additional exceptions for early withdrawals from your employer plan, but this is not the case for an IRA.

5. Personal Attention
The biggest difference between your employer-sponsored plan and an individual retirement account is the personal attention you receive with the latter. A managed IRA offers personalized investment options to fit your needs, goals, and risk tolerance.

We recommend interviewing and working with an Accredited Investment Fiduciary ® - AIF ®. An investment fiduciary is required to put your interests before their own, which puts your retirement savings in the most capable hands.

Let Us Help You with Your Retirement Rollover

Let Us Help You with Your Retirement Rollover

Planning your retirement rollover can be complicated, but we’re here to help you with the process. We will meet with you and discuss your options to help you decide what to do with your retirement accounts. Call us today to schedule an appointment with our certified financial planner.

"As I learn more about those I serve and grow my business, I realize it's about so much more than money. Knowledge guided by integrity is what truly influences lives." 

-Robert Stachura, CFP®

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