Don’t Gamble with Your Golden Years: Discover the Rollercoaster Ride of an IRA Rollover

Determining whether to roll over your retirement plan to an Individual Retirement Account (IRA) or keep it in your company plan when you retire requires careful consideration. There is no one-size-fits-all answer, as it depends on individual circumstances. Here are some factors to consider:

Here’s why you would want to keep your company plan:

1. Early Retirement and Financial Needs:

If you retire between 55 and 59½ and require funds from your retirement plan to pay off your mortgage, it is usually better to leave your money in the company plan until this withdrawal. Unlike with an IRA, you can avoid a 10% penalty when taking money out of the company plan.

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2. Transitioning to New Employment:

If you plan to start a new job, leaving your money in the company plan enables you to roll it over to your new employer’s plan. If you’re still working and want to wait until you turn 73 to take your required minimum distributions (RMDs), then this option could be advantageous for you.

3. Access to Investment Advice:

If your company plan provides good investment advice or if you are confident in making your own investment decisions, the fees associated with investments in the company plan are generally lower than those of an IRA through a financial adviser.

Related article: Uncover the Shocking 401(k) Fees That Could Drain Your Retirement Savings

4. Creditor Protection:

Company plan assets receive federal creditor protection, while state law protects IRAs. In some states, IRAs offer limited or no creditor protection against lawsuits, divorce, or other creditor-related issues. Leaving your money in the company plan might be more advantageous if your state lacks strong creditor protection and you face legal or creditor problems.

Here are the advantages associated with rolling over your company to an IRA:

1. Investment Options:

Rolling over to an IRA offers a wider selection of investment options than the limited choices in a typical company plan.

Related article: Attention Retirement Savers: Are You Overlooking These 4 Perks of Traditional IRAs

2. Quality of Service and Advice:

Former employees often receive better service and more professional advice from financial advisers when managing IRAs instead of dealing with inexperienced phone representatives who may handle company plans outsourced to third parties.

3. Charitable Contributions:

If you are inclined to make charitable donations, a qualified charitable distribution (QCD) allows you to contribute part of your RMD to charity tax-free. This benefit is exclusive to IRAs and unavailable if the funds remain in your company plan.

4. Consolidation and Simplification:

An IRA provides the convenience of consolidating multiple retirement accounts into one, streamlining the management of beneficiary withdrawal options, statements, and passwords.

10 Required Minimum Distributions:

While company plans often require RMDs from each plan separately, IRAs can be consolidated for calculating RMDs. This simplifies the process, as IRA owners can take their RMD for all their IRAs from just one account.

Before deciding whether to transfer your company plan to an IRA, it’s important to weigh the advantages and disadvantages. It’s also wise to consult with a financial advisor who can provide personalized guidance based on your individual circumstances.