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What is a Rollover?
Moving your eligible retirement funds left with a previous employer
to your own individually managed Rollover IRA account is a Rollover
(how to do a rollover?)
You can do a rollover if you are leaving, changing or retiring
from a job. In essence, you can take your retirement assets with
you when leave a job. More importantly, your money continues to
grow on a tax-deferred basis.
Why Do a Rollover?
A direct Rollover also allows your retirement money to continue
to maintain its special tax treatment, a tax-deferral. Continue
to build tax-deferred savings when you change jobs with a direct,
trustee-to-trustee, rollover.
Some of the advantages of doing a rollover when you leave your
employer are:
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1) |
Distressed companies may spell
trouble.
Large and small companies fall on hard times. When they do, your
pension funds may be in jeopardy. There have been cases where
employees have lost money because they can’t get their pension
funds due to a bankrupt or corrupt former employer. However, once
your funds are rolled over, you won’t have to be concerned about
what happens to your former employer.
Request
Free Quote & Information |
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2) |
Your previous employer may get
bought out or merge with another company.
The rules governing your retirement plan are largely decided
by your employer. These rules may very well change when a company
is merged or sold. And who knows, these changes may work to your
disadvantage. By rolling your funds over now, you won’t have to
be concerned about what happens to your former employer. |
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3) |
You may qualify for a
conversion to a Roth IRA, and if you do, it may be to your
benefit.
Only the Roth IRA gives you tax-free earnings and tax-free
withdrawals. After a five-year holding period and if you are
59-1/2 , you can take money out of a Roth-IRA without income tax
or tax penalty if the Roth rules are followed. Call us at 866-613-3636
to assist you with your decision on whether to convert to a Roth
IRA. |
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4) |
Build a more diversified portfolio.
With your own IRA rollover account, you get to select the
investment company and the investment choices you want.
Your previous employer’s pension plan may
limit or not even allow participants to choose their investments.
If the investment choices for your 401(k) plans or pension plan
perform poorly, you will have less money for your retirement. That
is not to say that your own investment choices will perform any
better, but by rolling over your funds you will have more control
on when, where and how your money is invested.
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5) |
Your 401(k) plan may have high
expenses.
It is not easy to find out what it cost you to have your money in
a 401(k) or similar employer sponsored retirement plan. When the
funds are left with the plan sponsor, they may not be invested as
you desire and there is an additional layer of administration to
go through for the former plan participant. Your plan fees may be
higher than your Rollover IRA fees. By rolling over your
retirement funds you stay in control of these costs by choosing
who administers and manages your funds. |
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Avoid losing track of your investments or
your employer losing track of you.
Over the course of your career you may change jobs several times.
You may move several times and your employer may also move to a
new location. Some people lose track of their paperwork and forget
that they had accumulated some pension money with one of their
previous employers. And, if that employer loses track of your
address you may never see that money again.
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Free Quote & Information
When you rollover your funds after you leave your employer,
especially when you consolidate your funds into one rollover
account, you reduce the risk of misplacing or losing track of your
money.
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7) |
Handle mandatory distributions
wisely.
If you have less than $5,000, the plan can decide to send you a
lump sum distribution. To avoid paying taxes and penalties on any
premature distributions do a direct rollover of those funds and
keep your retirement funds working for you. |
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Avoid the spousal consent rule.
If your retirement funds are left in a retirement plan and you
marry, the consent of your spouse will be needed if you decide to
name anyone other than your spouse as the beneficiary.
You, on the other hand, may want your parents
or someone else to receive that money. Executing a rollover when
you are still single lets you keep the flexibility to name any
beneficiary you want at any time without having to go to your
spouse for consent.
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9) |
Control the access to your funds.
Some plans do not allow a participant to withdraw only a portion
of their funds. Also loans from the plan may no longer be
available to you after you leave your employer. Thus, you may have
to pay taxes and penalties on all of your retirement money even
though you may only need part of it.
A
rollover IRA gives you the flexibility to take out, if needed, a
small part or all of your money. You may be subject to taxes and
penalties but only on the amount you pull out. You may even take
money out without penalty for qualified distributions such as
education expenses, first-time homebuyer expenses (up to $10,000),
medical expenses, death, and disability.
Request
Free Quote & Information
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10) |
Reduce the tax burden on your
beneficiaries.
Upon your death, your spouse has the option to withdraw your
pensions funds and roll them over to a tax-deferred IRA rollover
account. Any other beneficiary would be required to pay taxes on
any payout of your pension funds.
Some beneficiaries may not need these funds
right away and would rather delay receiving a payout in order to
avoid the income taxes and to take advantage of the continued
tax-free buildup inside the plan. Your beneficiary may be stuck if
the plan forces them to take the account balance.
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11) |
Too much company stock may be
risky.
Some companies have large portions of their employees’ profit
sharing and 401(k) funds in their company stock. By taking your
pension funds with you, you have more control on how your money is
invested and your level of diversification. |
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| Some reasons why you may not
want to do a rollover? |
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1. |
Company stocks are in your plan –
Significant tax advantages may be lost with a rollover. |
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2. |
Loans you took from the plan are outstanding
– Loans cannot be rolled over, and a loan not paid off may be
treated as a taxable distribution. |
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3. |
Pending bankruptcy – In a bankruptcy you may
have a greater degree of protection if your funds are in a
qualified plan instead of in an IRA. |
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4. |
Investments that cannot be duplicated outside
of plan – If you have investments in your plan that you want to
keep and there are no comparable or better choices available
outside. |
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Need
Help? Toll free :
866-613-3636 |
M.C.D.
Financial Services 6520
Northumberland St, Pittsburgh PA 15217
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