Moving money from your 401(k) plan?

Some pros and cons to consider.

You may think you’re taking control of your future by maintaining a qualified retirement plan
offered by a former employer, such as a 401(k), 403(b), or government 457 plan. But are you?
Some retirees take a passive approach to their retirement assets, keeping accounts with past
employers for the sake of simplicity.

If you have a retirement account with just one employer, you may have suitable investment
options and may pay low fees, so it might make sense to leave your retirement assets in your
former employer’s retirement plan. But if you have multiple retirement accounts with different former employers or if your investment choices are limited, you might want to consider combining your assets into one traditional Individual Retirement Account (IRA). Here’s why.

A rollover IRA could provide you with greater flexibility than your current plan(s). For example,
some qualified retirement plans may offer limited investment options, one of which may be the employer’s stock. That limitation could put your retirement savings at risk, particularly if your savings are concentrated in just a few funds or even in a single company’s stock. In contrast, a selfdirected IRA could offer a variety of investment options, allowing you to potentially allocate your retirement funds more appropriately according to your personal investment goals.

It might be difficult to manage investments spread between multiple plans. If you have more than one retirement account, consolidating your retirement assets into a single rollover IRA could make it easier to manage and track your investments with considerably less paperwork. In addition, keeping retirement assets in one place simplifies beneficiary designations and estate planning.

The mutual funds available through your current plan may have high expense ratios. A small
savings of even half a percentage point in fund expenses can mean thousands of dollars more in your account over a few years. In your own IRA, you have control over the investments you select and the expense ratios you feel are appropriate. The mutual fund cost calculator available from the Securities and Exchange Commission (SEC) can help define just how many dollars. Just go to www.sec.gov, and click on “Calculators for Investors” under “Investor Information.”

The best news: When you make a direct rollover, no money is actually distributed to you; it moves straight into the IRA. So you’re not taxed until you withdraw the money later, and 100% of your retirement assets can continue to work for you on a tax-deferred basis.

Now, there are some complications with rolling money from an employer-sponsored retirement plan into an IRA. Your plan may have some limitations on rollovers. For example, some plans may restrict rollovers while you are currently employed by the company that offers the plan. And, if any part of your investment is held in stock, you will need to find out the plan has rules about selling your shares. Additionally, there may be different creditor protection issues when funds are in a company plan vs. an IRA.

We can help you decide whether moving your 401(k) is the best decision for you. Please contact me to learn more. If you would like to meet either in person or by telephone, please use the CONTACT US link and let me know.

I look forward to meeting you!