• leave the money in the former employer’s plan, if permitted;
• rollover the assets to a new employer’s plan, if available and permitted;
• rollover to an IRA; or
• cash out the account value.
There are various factors to consider upon a recommendation to rollover plan assets to an IRA including:
• Investment Options — An IRA often enables you to select from a broader range of investment options than a plan. The importance of this factor will depend in part on how satisfied you are with the options available under the plan being considered.
• Fees and Expenses — Both plans and IRAs typically involve (i) investment-related expenses and (ii) plan or account fees. Investment-related expenses may include sales loads, commissions, mutual fund expenses, and investment advisory fees. Plan fees typically include plan administrative fees and service fees such as access to a customer service representative. In some cases, employers pay for some or all of the plan’s administrative expenses. An IRA’s account fees may include, for example, administrative, account set-up and custodial fees.
• Services — Some plans provide access to investment advice, planning tools, telephone assistance, educational materials and workshops. Similarly, IRA providers offer different levels of service, which may include full brokerage service, investment advice, distribution planning and online trade execution.
• Penalty-Free Withdrawals — If you leave a job between ages 55 and 59½, you may be able to take penalty-free withdrawals from a plan paying only ordinary income tax. In contrast, penalty free withdrawals generally may not be made from an IRA until age 59½. It also may be easier to borrow from a plan. Also, borrowing from your IRA isn’t allowed, but you may be able to borrow from a plan.
• Life Insurance Coverage — The plan may include a pre-retirement death benefit in addition to your accumulated account balance through the purchase of life insurance. IRAs aren’t allowed to include life insurance protection.
• Protection from Creditors — Generally, plan assets are protected from creditors under federal law, while IRA assets are protected in bankruptcy proceedings only. State laws vary with respect to protection of IRAs in lawsuits.
• Required Minimum Distributions — Once an individual reaches age 70½, the rules for both plans and IRAs require the periodic withdrawal of certain minimum amounts, known as the required minimum distribution. If you are working at age 70½, however, you may not be required to if you plan to work into your 70s. These are some examples of the factors that may be relevant when analyzing available options. Other considerations might apply to specific circumstances.
2015-8981 (Exp. 07/17)