To Roll Over or Not?

By Admin Prepare

November 25, 2017

The employer sponsored retirement plan is one of the most popular types of retirement savings plans.  In fact, most people, at some point in their lives, have contributed to some type of employer savings plan like a 401k or 403b.  However, the popularity of this type of plan brings many questions and options.  One common question that we get on a regular basis is the rollover question; what should one do with the plan once they change employers, separate from service or retire.

When one separates from service for any reason, the option to take the money out of the retirement plan and doing something else with it comes available.  The decision you make here is very important and can have many consequences.  Participants generally have five options when leaving their employer-sponsored plan, consisting of:

  • They can leave the money in the former employer’s plan, if permitted
  • They can roll the assets to a new employer’s plan, if one is available and rollovers are permitted
  • They can roll the assets into a self directed IRA or a managed account IRA
  • They can convert the money to a Roth IRA
  • They can cash out the plan

There are advantages and disadvantages to each of these options.  Deciding what to do is not easy as many factors and options must be considered for your unique, specific situation. Plus, the decision is made even more difficult when the very people from whom one might seek counsel provide misleading, inaccurate or conflicted advice.  Given the amount of money that comes into play for these options each year, and all that could go wrong, the nation’s top regulators and watchdogs, including the SEC and FINRA, are putting financial firms and advisors on notice: Do right by retirement savers with their IRA rollovers.

What is for certain is that proper education is vital when dealing with retirement plan choices.