If you’ve changed jobs or are preparing to retire, you may have account balances in one or more workplace retirement plans. To make a thoughtful decision about what to do, make sure you understand your options.
If your old plan allows, you may be able to leave your retirement assets right where they are without incurring current income taxes and possible additional taxes for early withdrawal.
If your new employer's plan accepts rollovers, you can move your money to that plan without incurring current income taxes and possible additional taxes for early withdrawal.
An IRA may provide more flexibility and a wider range of investment options in addition to preventing current income taxes and possible additional taxes for early withdrawal.
Please note that an IRA may be subject to an annual fee, and a fee may be assessed if the IRA is closed.
When deciding between an employer-sponsored plan and an IRA, there may be important differences to consider—such as range of investment options, fees and expenses, availability of services, and distribution rules (including differences in applicable taxes and penalties).
Depending on your plan's investment options, in some cases, the investment management fees associated with your plan's investment options may be lower than similar investment options offered outside the plan.
Get immediate access to your retirement savings. The taxable portion of the distribution is generally subject to a mandatory 20% federal income tax withholding (you may owe more or less when you file your taxes), and additional taxes for early withdrawal may apply. State income tax may be withheld from your distribution under the applicable state law if your address of record is in a state that defaults to withholding.
| Plan Features | Stay in Plan | Roll Over to IRA | Roll Over to New Employer's Plan | Cash Out |
|---|---|---|---|---|
| Convenience | A minimum balance requirement of $5,000 might be required. You can maintain your current investments, and you don’t need to take further action. | Enables you to manage your retirement assets in one location. View your overall financial picture in one place. Reduce number of statements and other communications. |
May involve a waiting period.
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Provides immediate access to your retirement plan assets. |
| Tax Advantages and Disadvantages | Keeps your assets tax-deferred (not taxable until you access your savings).1 | Assets are tax-deferred (meaning not taxable until you access your savings).1 | Assets are tax-deferred (meaning not taxable until you access your savings.1 | Removes potential for continued tax-deferred or tax-free growth of your assets.
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| Access to Money | If your plan offers loans, they are typically only available for active employees. Generally allows for penalty-free withdrawals if you retire the year you turn 55 or older. Otherwise, penalty-free withdrawals are available after age 59½. Waive early IRS distribution penalties if certain requirements are met, regardless of age. Some examples include unreimbursed medical expenses, disability, and qualified military reservists called to active duty. | No loan provisions. Withdrawals available without penalty after age 59½. Waive early IRS distribution penalties if certain requirements are met, regardless of age. Some examples include unreimbursed medical expenses, disability, higher education expenses, first-time home purchase, and qualified military reservists called to active duty. Must begin taking required minimum distributions (RMDs) in the year which you turn 70½ (if you reached 70½ on or before 12/31/19) or 72 (if you haven’t reached 70½ on or before 12/31/19).(RMDs are not required for Roth IRAs if you are the original owner). |
Loans may be available. Generally allows for penalty-free withdrawals if you retire the year you turn 55 or older. Otherwise, penalty-free withdrawals are available after age 59½.
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Allows immediate access to your retirement plan assets. |
| Investment Choices | Limited investment options. Offers familiar investment options. May provide access to company stock or other investment options not available outside of the plan. |
Access wider range of investment options. Consult a tax professional to determine the appropriate strategy if plan investments include company stock. |
Investment choices limited to those in the plan. May provide access to company stock or other investment options not available outside in the plan. |
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We make it easy by working directly with your current provider to handle all of the paperwork.
Speak with a Financial Consultant for general investment guidance and educational resources.
Monday–Friday, 8 a.m.–8 p.m. ET.
We offer different levels of advice that can help you achieve your goals and build a secure financial future.
1Roth contributions (and earnings) and after-tax contributions may, in certain circumstances, be tax-free when distributed. Also, special tax rules apply when taking a distribution of company stock. Consider consulting a tax professional.
Consider all available options, which include remaining with your current retirement plan, rolling over into a new employer's plan or IRA, or cashing out the account value. When deciding between an employer-sponsored plan and IRA, there may be important differences to consider, such as range of investment options, fees and expenses, availability of services, and distribution rules (including differences in applicable taxes and penalties). Depending on your plan's investment options, in some cases, the investment management fees associated with your plan's investment options may be lower than similar investment options offered outside the plan.
Earnings include realized gains and other taxable fund distributions, including dividends and capital gains.
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