2. Your employer retirement plan is an older, more expensive plan.
Many employer retirement plans have high costs which reduce returns. Since the “Great Recession” of 2008, this has been improved, but you may lower your costs by moving your money out of a 401(k) into an IRA.
3. Your company retirement plan has limited investment options.
The average 401(k) has approximately 25 investment options. While 25 may seem like a lot, many of the mutual funds are very similar. Some plans lack asset classes vital to building an efficient portfolio. An example, but not limited to are international bonds, small stocks, real estate, or health care.
4. Your plan has limited beneficiary options.
Many company retirement plans do not allow you to leave your money to a trust set up for your beneficiaries. Few plans allow your heirs to “Stretch” the retirement plan once you have died. (The “Stretch” option means that non-spouse heirs can take annual withdrawals over their lifetime in order to prevent a forced taxable payout of the plan after you have died.) The tax implications of this limitation are tremendous. If you desire for your children or grandchildren to enjoy your 401(k) or 403(b) dollars for their lifetime, or for them to enjoy the creditor protection that a separate IRA trust can provide – then most likely an IRA rollover will have to be performed.
5. Required Minimum Distributions can be difficult.
If you are retired and over age 70 and 1/2, you must make withdrawals from your retirement plan based upon a schedule found in IRS Pub. 590. If these withdrawals are not taken on time, you will face a 50% tax penalty on dollars not withdrawn. If you have several retirement plans, you must make these distributions out of each and every plan. Most people consolidate their 401(k)’s or other retirement plans into one IRA for simplicity of record keeping.
6. Even Roth 401k(s) are subject to Required Minimum Distributions.
Even if your 401k has post-tax or Roth dollars, these dollars are still subject to being forced out of the account according to the IRS’s Required Minimum Distribution schedule. However, if you roll these assets directly to your own Roth IRA, you are not forced to withdraw these funds on the government’s schedule.
7. You don’t want your old company “knowing your business.“
This is one of the more common reasons that people rollover their 401(k), 403(b), or TSP when they leave or retire, and are self-explanatory.
The above list is only a few of the reasons that clients rollover their company retirement plans to an IRA with 369 Financial, LLC. Remember – it is critical to do it CORRECTLY.
