401(k) Rollover Planning
Don't Move Your 401(k) Until You Understand Your Options
When you leave an employer, you don't necessarily have to move your retirement savings immediately.
Depending on your situation and the plan's rules, you may be able to:
Leave Your Money in Your Former Employer's Plan
Keeping your existing 401(k) may make sense in some situations, particularly if you're satisfied with the plan's investment options, fees and features.
Move It to Your New Employer's Plan
If your new employer's retirement plan accepts rollovers, you may be able to consolidate your retirement savings into your new workplace plan.
Roll It Into an IRA
A rollover to an IRA may provide different investment options and allow you to consolidate retirement assets, depending on your circumstances.
Take a Distribution
You may also be able to withdraw some or all of the money, although taking a taxable distribution can have significant tax consequences and may result in an additional tax in some circumstances.
The IRS confirms that these are among the options that may be available when someone leaves an employer.
The important question isn't simply "Should I roll over my 401(k)?"
It's:
"Which option makes the most sense for my situation?"
What Should You Consider Before Rolling Over?
A 401(k) rollover can look simple on the surface, but there are several factors worth considering before making a decision.
Investment Options
What investments are available in your current 401(k), your potential new employer plan or an IRA?
Fees & Expenses
How do the costs of the different accounts compare?
Investment Management
Would you prefer to manage the account yourself, or work with an investment adviser?
Tax Considerations
Different types of retirement accounts and rollover strategies can have different tax consequences. A rollover to a Roth IRA, for example, generally involves taxable income on the amount converted that would otherwise be taxable.
Account Consolidation
Would consolidating multiple retirement accounts make your financial life easier to manage?
Your Overall Retirement Plan
Most importantly, how does the decision fit into your broader retirement income and investment strategy?
A rollover shouldn't be evaluated in isolation.
What Should You Do With Your Old 401(k)?
Leaving a job or approaching retirement can leave you with an important financial decision: what should you do with the money in your former employer's retirement plan?
You may have several options, and the right choice depends on your individual circumstances.
Parker Prescott Capital Management helps individuals and families in Dallas and throughout the DFW area understand their 401(k) rollover options and how those decisions fit into their broader financial plan.