We Can Help with Your 401(k) Options
Changing jobs? You may have up to four options.
Rollovers from Employer-Sponsored Plans
→ Rollover to an IRA
→ Rollover to another employer's plan
→ Remain in the plan
→ Take a distribution in cash
The Pros & Cons
If you are changing jobs and wondering what to do with your 401(k), schedule your strategy call today!
Schedule Your Strategy Call →Rollover to an IRA
Pros
- Continue any tax-deferred growth opportunity.
- Avoid early withdrawal penalties.
- Have flexibility to select investment services and options that fit your specific needs.
- Choose a Roth after-tax account, if appropriate
- May be able to consolidate your personal and retirement assets with one provider.
- More flexible income and distribution options.
Cons
- Can’t borrow against your IRA assets.
- Annual fees and/or commissions apply, and maybe higher than your plan.
- May lose access to lower cost institutional share classes and other investment options available only to plan investors.
- May be custodial and other maintenance fees
- As securities held in the plan generally can’t be transferred to the IRA, commissions charged on transactions in the IRA will be in addition to commissions and sales charges previously paid on transactions in the retirement plan.
- IRA assets are protected in bankruptcy proceedings only.
Rollover to another employer's plan
Pros
- Continue any tax-deferred growth opportunity.
- Avoid early withdrawal penalties.
- Move your savings to another retirement plan later.
- Have continued access to your plan investment options and services.
- Protection from creditors.
- Likely has lower fees than an IRA.
- May have a Roth conversion option.
- May be able to delay required minimum distributions past age 73, if still working.
- Likely includes low-cost institutional funds not available to the general public.
- May have investment advice and education services that could meet your needs.
Cons
- Limited to the investment options and services offered by that plan.
- You may still have to pay plan administrative fees (e.g., recordkeeping, compliance, trustee fees), although some employer plans pay for these administrative expenses at no cost to you.
Remain in your plan
Pros
- Continue any tax-deferred growth opportunity.
- Avoid early withdrawal penalties.
- Move your savings to another retirement plan later.
- Have continued access to your plan investment options and services.
- Protection from creditors.
- Likely has lower fees than an IRA.
- May have a Roth conversion option.
- May be able to delay required minimum distributions past age 73, if still working.
- Likely includes low-cost institutional funds not available to the general public.
- May have investment advice and education services that could meet your needs.
Cons
- Limited to the plan's investment options.
- May not be able to remain in the plan if your account is less than $5,000.
- You typically can’t take a loan against your old 401(k) plan once you are no longer an active employee.
- You may still have to pay plan administrative fees (e.g., recordkeeping, compliance, trustee fees), although some employer plans pay for these administrative expenses at no cost to you.
- Might end up with retirement savings in multiple accounts with multiple providers.
- Some plans offer only lump-sum distributions and do not have lifetime income options—you should check your plan’s terms for more information about available distribution options.
Take a cash distribution
You can decide to take the money out of your plan. Taking a distribution in cash means you will have some money to spend right now, but this option can come with a price. For example, you will lose the ability to grow your savings on a tax-advantaged basis. In addition, your distribution may also be subject to state and federal taxes, including a mandatory 20% federal withholding. If you are under age 59½, a 10% early withdrawal penalty may also apply.
Taking a distribution of shares of company stock may lower taxes, if eligible. If you are thinking about cashing out, be sure to factor in these penalties and consider if you would be better off keeping your money invested for the long term. Please consult with your tax advisor for additional information.