Factors to consider when rolling over employer retirement savings plans

There are many factors to consider when deciding whether to roll over a distribution from a 401(k), 403(b), or governmental 457(b) plan1, and where your rollover dollars should go if you decide to make a rollover.
When considering rolling over your employer retirement savings plan, always do the following three things:
- Ask about the possible surrender charges that may be imposed by your existing employer plan, or new surrender charges that your IRA or new plan may impose.
- Compare investment fees and expenses charged by your IRA or new plan (and investment funds) with those charged by your existing employer plan (if any).
- Understand any features, rights and guarantees you may be giving up, or gaining, by moving your funds to an IRA or new employer plan.
The table below will help you weigh your options when it comes to rolling over your funds to an IRA or leaving your funds in your original employer savings plan or rolling over to a new employer plan.
Rolling over funds to an IRA vs. using an employer plan
Roll funds over to an IRA |
Leave funds in original employer plan or roll over to new employer plan |
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Investment options |
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Fees and expenses |
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Ability to change trustees/custodians |
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Distribution flexibility |
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Annuity option |
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Roth required minimum distributions |
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Non-Roth required minimum distributions |
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Loans |
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Creditor protection |
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10% early distribution penalty (does not apply to rollovers or Roth conversions) |
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Other services |
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Rollover of after-tax dollars |
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Conversion of pre-tax and after-tax dollars to Roth |
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Five-year holding period for tax-free qualified Roth distributions |
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Employer stock |
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Need help making important financial decisions?
As a member of Arsenal Credit Union you have access to David Weis, our knowledgeable financial advisor available through our broker-dealer CUSO Financial Services, LP (CFS)*. Click here to learn more about David and the services he offers.
More 401(k) resources
- Important 401(k) terms to know
- Leaving your job? Here are some of your retirement savings plan options
- Rolling over funds from an employer retirement savings plan? Here’s what you need to know.
- Changing jobs? Know your 401(k) options
- Six potential 401(k) rollover pitfalls
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Before deciding whether to retain assets in an employer sponsored plan 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.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.
1 This table considers the options for eligible rollover distributions. You cannot roll over hardship withdrawals, required minimum distributions, substantially equal periodic payments, corrective distributions, and certain other payments. Special rules may apply if you are the beneficiary of a plan participant.
2, 4 You can make only one indirect (60-day) rollover from one IRA to another IRA in any 12-month period, regardless of how many IRAs (including traditional, Roth, SEP, and SIMPLE IRAs) you own. There are no limits to the number of trustee-to-trustee (direct) transfers you can make.
Diversification alone cannot guarantee a profit or ensure against the possibility of loss. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any strategy will be successful.
3Before investing in a mutual fund, carefully consider the investment objectives, risks, charges, and expenses of the fund. This information can be found in the prospectus, which can be obtained from the fund. Read it carefully before investing.
5 Federal protection from creditors outside bankruptcy applies to plans covered by the “anti-assignment” provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Individual (solo) 401(k) plans, governmental plans, SEP and SIMPLE IRA plans, and certain church plans are generally not covered by these ERISA provisions.