1) What are
some options for people with retirement plans when they change jobs or retire?
For people that are changing jobs they have a few options. They can transfer the funds into the retirement plan at their new employer, or if a plan is unavailable they can do what is called a direct rollover into an Individual Retirement Account (IRA). This is a tax-free exchange and the individual will have more investment choices with an IRA than with their employers plan. The last option is that they can take a cash distribution. However, there will be tax implications and possible penalties if the individual is not 59 ½. The options for the newly retired are pretty much the same. They can leave the funds in their current plan, roll them over to an IRA, or take a cash distribution. However, once again with a cash distribution there are tax implications and they should consult either their accountant or tax attorney to find out what those implications could be.
2) Are there
any other times that an individual may be able to initiate a rollover?
Yes. If your company or division of your company has been sold or merged with another company may be an opportunity to rollover your 401k. Also, if you are over the age of 59 ½ you may be able to do what is called an in-service transfer. That is where you take the dollars that you have contributed and roll them over to an IRA. You will have to consult your plan administrator to see your plan allows this. Most of them do.
3) Why would
an individual want to roll over their funds?
The biggest reason people should consider rolling over their retirement assets is the ability to have more control over investment choices. Inside an IRA you will have many more choices than you will in a 401k plan. Another reason to consider is to make sure the individual has beneficiaries named properly so that the individual has the option of “stretching” those assets over generations. The last reason is to maybe convert some of those assets to a Roth IRA. When converting to a Roth there are some tax implications so it wise to consult your tax professional before initiating a conversion.
If you want more information please contact me for a free report entitled “Making the Most of Your Employer Sponsored Retirement Plan”