Consolidating Retirement Money

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Have you accumulated a number of workplace retirement accounts over the years? You may want to consolidate these assets into a single rollover IRA to simplify your life and take control of your financial future. Thanks to favorable tax laws, your retirement plan assets can be as mobile as you are. 

How you choose to handle your retirement assets could have a lasting impact on the size of your nest egg and ultimately on the type of retirement you can enjoy.

When you leave your employer, you generally have four options for handling the money in your retirement plans:

  1. Leave it in your former employer’s retirement plan.
    If you are between age 55 and 59 ½ this plan may not be subject to the early distribution penalty while other plans generally will be.
  2. Transfer it to your new employer’s retirement plan.
    Each plan has its own rules for what assets it will accept and what access you will have to your rolled over assets.
  3. Take the money out of the plan.
    Depending on the plan’s options, you may be able to take installments, an annuity or a lump sum. The downside of this option is that you may pay taxes, and you may incur a 10% penalty tax, depending on when and how you take the money.
  4. Roll over the money into an IRA.
    Money from a 401(k), 403(b), profit-sharing plan, money purchase plan and other qualified plans can be invested in a rollover IRA.

For most people, the best option could be to transfer retirement money into a rollover IRA because:

  • A direct rollover is a non taxable event
  • You generally gain access to more investment options
  • There is an opportunity to allocate, diversify and rebalance in one account

Some Key facts to remember are:

  • In most cases, you get access to rolling over your plan assets only when you retire, change jobs or are laid off.
  • Both employer plans and rollover IRAs have fees and investment-related expenses that an investor will incur.
  • Each plan can still have its own rules that govern current and former employees’ access to plan assets

There are advantages and disadvantages to an IRA rollover depending on investment options, services, fees and expenses, withdrawal options, and your unique financial needs and retirement goals. Please be aware that rolling over retirement assets into one IRA account could potentially increase fees.

Contact me to set up a complimentary consultation to discuss your retirement rollover options.

(Listed content was originally created by MFS Fund Distributors, Inc. Boston, MA)