Is a Rollover Right for You?

While it's certainly acceptable to leave your money in your former employer's plan, in some instances it might make sense to consolidate your assets.

If you've recently changed jobs -- or maybe changed jobs a few times over the years -- you may be juggling multiple retirement plan accounts. While it's certainly acceptable to leave your money in your former employer's plan (as long as your balance is over $5,000, your old employer can't cash you out), in some instances it might make sense to consolidate your assets.

Consolidation can help make administering and allocating your assets much simpler.1 Having your entire retirement portfolio summarized on one statement makes it easier to track performance and make changes.

But before you initiate a rollover, be sure to compare the investment options and their associated fees in your old plan with those in your new plan.

  • Were you able to properly diversify your assets in your old plan?1 If your investment choices were limited, you may want to consider other options.
  • Are the investment fees higher or lower than those in your current plan? If you were paying more at your old plan, it may be a good reason to consider moving your assets to a plan with lower investment fees.
  • Are you satisfied with the investment choices and fees charged in your current plan? If you're not happy with your current plan -- and weren't crazy about your old plan -- you can always roll over your old plan assets into an IRA.2

Initiating a rollover isn't difficult. First, check your current plan rules to confirm that rollovers are permissible (many plans accommodate this feature). Then contact the administrator of your old plan (you can find their information on your quarterly statement) to get the ball rolling. Some plan providers have a simple online request process, while others require completion of a paper-based rollover form. Your current plan provider or IRA provider may even furnish a rollover service for you.

It's also important to know the difference between a rollover and a distribution. A rollover allows you to transfer your money from one qualified retirement account to another without incurring any tax consequences.

A distribution is essentially a withdrawal from your account. Taking a distribution means you will have some money right now, but it comes with a price. If you request a distribution, the account administrator is required by law to withhold 20% of your account balance to pay federal taxes. State taxes, if applicable, are also due. If you are under age 59½, you will probably be hit with a 10% additional federal tax.

If you have specific questions about your retirement plan distribution options, contact your employer's benefits coordinator or a qualified financial consultant.


1Asset allocation and diversification do not ensure a profit or protect against a loss.

2There are other factors to consider before making a final decision, including long-term tax implications, creditor protection, and access to funds. The most appropriate option for you will depend on your individual needs and circumstances.






This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

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