One great thing about a 401(k)-retirement savings plan is that your assets are often easy to move when you leave from one job onto the next. But what should you do with them? Rolling over your 401(k) to an IRA is one option, but you should consider all of them before you do so. There are several factors you should consider when thinking about making a rollover.

1. Leave your money in your former employer’s plan if permitted. 

Choosing this option means you don’t have to make an immediate decision about moving your savings. Your account says subject to your previous employer’s plan rules, including investment choices, 

Pros

• No immediate action is required.
• Any earnings remain tax-deferred’ until you withdraw them.
• You may have access to investment choices, loans, distribution options, and other services and features that are not available with a new 401(k) or an IRA.
• You still have the option of rolling over to an IRA or to a 401(k) offered by a new employer in the future, if the new employer’s plan accepts rollovers.
• Your former employer may offer additional services, such as investing tools and guidance.
• Under federal law, assets in a 401(k) are typically protected from claims by creditors.
• Your former employer’s plan may have lower administrative and/or investment fees and expenses than a new 401(k) or an IRA.
• You may be able to take a partial distribution or receive installment payments from your former employer’s plan.
• If you leave your job between ages 55 and 59½, you may be able to take penalty-free withdrawals.
• Required minimum distributions (RMDs) may be delayed beyond age 73 if you’re still working.

Cons

• If you hold stock in your former employer in the plan, you may have special tax or financial planning needs you should consider before rolling over your assets to a new employer’s 401(k) or an IRA.
• You can no longer contribute to a former employer’s 401 (k).
• Your range of investment choices and your ability to transfer assets among funds may be limited. 
• Managing savings left in multiple plans can be complicated.
• The fees and expenses for your former employer’s 401(k) may be higher than those for a new employer’s 401(k) or an IRA.

2. Roll over your money to a new 401(k) plan, if this option is available

If you’re starting a new job, moving your retirement savings to your new employer’s plan is an option. A new 401(k) plan may offer benefits similar to those in your former employer’s plan. Depending on your circumstances, if you roll over your money from your old 401 (k) to a new one, you’ll be able to keep your retirement savings all in one place. Doing this can make sense if you prefer your new plan’s features, costs, and investment options.

Pros

• Any earnings accrue tax-deferred (pay taxes later on).
• You may be able to borrow against the new 401 (k) account if plan loans are available.
• Under federal law, assets in a 401(k) are typically protected from claims by creditors.
• You may have access to investment choices, loans, distribution options, and other services and features in your new 401(k) that are not available in your former employer’s 401(k) or an IRA.
• The new 401(k) may have lower administrative and/or investment fees and expenses than your former employer’s 401(k) or an IRA.
• Required minimum distributions (RMDs) may be delayed beyond age 73 if you’re still working. 

Cons

• You may have a limited range of investment choices in the new 401(k).
• Fees and expenses could be higher than they were for your former employer’s 401(k) or an IRA.
• Rolling over company stock may have negative tax implications.

3. Roll over your 401(k) to a Traditional IRA

If you’re switching jobs or retiring, rolling over your 401(k) to a Traditional IRA may give you more flexibility in managing your savings. Traditional IRAs are tax-deferred retirement accounts.

Pros 

• Your money can continue to grow tax-deferred.’
• You may have access to investment choices that are not available in your former employer’s 401(k) or a new employer’s plan.
• You may be able to consolidate several retirement accounts into a single IRA to simplify management.
• Your IRA provider may offer additional services, such as investing tools and guidance.

Cons

• You can’t borrow against an IRA as you can with a 401 (k).
• Depending on the IRA provider you choose, you may pay annual fees or other fees for maintaining your IRA, or you may face higher investing fees, pricing, and expenses than you would with a 401(k). 
• Some investments that are offered in a 401(k) plan may not be offered in an IRA.
• Your IRA assets are generally protected from creditors only in the case of bankruptcy.
• Rolling over company stock may have negative tax implications.
• Whether or not you’re still working at age 73, RMDs are required from Traditional IRAs.

In conclusion, the best option for rolling over your employer’s 401(k) plan depends entirely on your current situation and your long-term goal for those savings. The most common option people chose is a Rollover into an IRA. You can also roll your 401(k) into a Roth IRA which can help you continue to save for retirement while letting any earnings grow tax-free. For any additional questions regarding rollovers please reach out to a Retirement Road advisor today. 

Disclosure: Before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock. Please view the Investor Alerts section of the FINRA website for additional information.