Roll with it
Understand the fees
Sometimes it makes financial sense to leave your holdings in your previous employer’s 401(k) plan. For example, if your former employer’s plan offered appealing investment selections or preferential pricing for some reason. Plan providers are required to disclose their account fee structure, so dig out copies of your retirement plan statements, or go online to review plan details. This will help you calculate out how much you are being charged at the investment level, which is called “expense ratio,” and at the account level, which is known as “management fees.”
If you find the fees from your former employer’s plan are more expensive than the fees you can find in an IRA, it might be wise to consider a rollover. In addition, if you have multiple 401(k) accounts at prior employers, it could make sense to consolidate all of them into a single IRA.
Know if you want to diversify
If you’re hoping to have a more diversified portfolio, rolling over from a former employer’s plan might be a smart move. Some 401(k) plans offer limited access to certain investment options, such as fixed income, index (or Exchange Traded Fund), government bonds and small cap value offerings.
Keep track better by simplifying
Once you’ve left an employer, keeping track of changes to the retirement plan provider, access and login credentials can be tricky, especially if you have several 401(k) accounts at different providers. Consolidating to a single account or a single provider is one way to help simplify your investment management.
Schedule your withdrawal
When you retire and you are ready to begin withdrawing your funds, IRAs can provide flexibility. For example, in an IRA, you can select which investments to sell and you can set the timeframe for withdrawal, once you reach age 59½. While many larger 401(k) plans enable scheduled withdrawals, some plans require account holders to redeem all of the holdings at once, according to the Plan Sponsor Council of America. IRA rollovers can provide consumers with access to a broader set of fund selections. If this is not the case, or if you are happy with the fees associated with your former employer’s plan, you can certainly leave it where it is.
For Educational Purposes Only.
Information about IRA rollovers is intended to be educational only. It is not tailored to the investment needs of any specific investor. This information should not be considered tax or legal advice.
IRA rollovers are subject to complex tax laws and regulations which are subject to change and which can materially affect investment results. Westwood cannot guarantee that this information is accurate, complete, or timely. Westwood makes no warranties regarding this information or results obtained by using it. Westwood disclaims any liability arising out of the use of, or any tax position taken in reliance on, this information. Be sure to consider all your available options and the applicable fees and features of each before moving your retirement assets.