Six Reasons to Consider a 401(k) Rollover

Rolling over your existing 401(k) to an IRA at retirement can help you manage your accounts more efficiently, and pay less in account fees.

You can also opt to take your money by cashing out from your 401(k), however, you may not only get taxed and penalized, but you could also lose the earnings that money could have generated.

Here are six reasons to consider rolling over your
401(k) to a traditional IRA when you retire:

  • Pay lower administrative fees. 401(k) plan fees generally include administrative costs and fees for recordkeeping and services that will cut into your account over the long term. And, as a former employee, you may be charged extra maintenance fees. By rolling your money over to an IRA, you may avoid other costs.
  • Stay up-to-date on changes. Your 401(k) investment choices can change at any time and you might not get the latest information as quickly as those who still work there. Once you're not working, you’ll need to continually monitor the investment options available under the 401(k) plan and be aware of any company changes in investment choices, trustees, and/or fees. For example, your money could be invested in a fund that's no longer available and be automatically moved into a default account that is not consistent with your investment style and objectives.
  • Retain control of your investment dollars. Your former employer's 401(k) plan might have limited investment options available which may limit your money’s growth potential. However, if you roll over you’re likely to find many more investment choices than in your 401(k) plan.
  • Enjoy more investment choices. Most 401(k) plans have very limited investment choices. That may include some with high fees, expense rations, and etc. If you roll over your 401(k) into an IRA, you have more investment choices to choose from.
  • Consolidate and simplify your accounts. Workers who have frequently changed jobs can end up with several different 401(k) accounts if they don’t roll them over into an IRA. It’s much easier to check on your accounts if they are all in one IRA instead of many 401(k)s.
  • Avoid a penalty for withdrawal under certain circumstances.Individuals under the age of 59½ are required to pay, in addition to income taxes, a 10% penalty tax on withdrawals from employer-sponsored retirement plans and IRAs, unless they qualify for an exception. Three exceptions for IRA distributions — a qualified first-time home purchase (lifetime limit of $10,000), certain higher education expenses, and health insurance premiums while unemployed — are not available for employer-sponsored retirement plan distributions.

Retirement is one of the most important goals for many people and your retirement account could be your largest investment. A qualified financial adviser you trust can help you understand your investments, and the possible risks associated with them, and help you achieve a financially secure retirement.

IRA Rollover Disclosure

Before rolling over the proceeds of your retirement plan to an Individual Retirement Account (IRA) or annuity, consider whether you would benefit from other possible options such as leaving the funds in your current plan or transferring them into a new employer’s plan. Consult with each employer’s Human Resources Department to learn about important plan features and rules. Be sure to compare the fees and expenses of each plan and investment option to those of any other investments that you are considering. Review plan documents and the IRA agreement, as well as the prospectuses for plan investment options and any other investments that you are considering. Your registered representative can help explain any new product being offered. Neither New York Life nor its representatives or affiliates provide tax or legal advice.

Consult with a tax or legal advisor to discuss any questions or concerns that you have, such as the tax consequences of withdrawing funds or removing shares of an employer’s stock from a retirement plan and whether money invested in a retirement plan receives greater protection from creditors and legal judgments in your state than money invested in an IRA or annuity. Also consider that you may be able to take taxable, but penalty-free withdrawals from an employer-sponsored retirement plan between the ages of 55 and 59.5 that you would not be able to take if you invest in an IRA or annuity. Additionally, if you plan to work after you reach age 70.5, you may not be required to take minimum distributions from your current employer’s retirement plan but would be required to do so for funds invested in an IRA or annuity.

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