Should You Roll Over Your 401(k)?

Perhaps you are nearing the point of retirement. Perhaps you are about to change jobs. Or perhaps you have just grown disenfranchised with the performance of your 401(k). Whatever the reason, the thought has occurred to you: You could roll over your 401(k) into an Individual Retirement Account (IRA). The question is, should you?

That’s not a question we will answer here, because it is a highly individualized matter. There is no blanket response; to know what’s most advantageous for you, you will need to speak with a financial advisor.

With that said, there are some potential benefits to rolling over a 401(k)—benefits that no investor should ignore.

Potential Benefits of a 401(k) Rollover

A few of these possible benefits include:

Rules that are clearer and less confusing. One of the ongoing struggles for many 401(k) holders is the fact that these accounts are not really standardized. What this means is that your account may work differently from your neighbor’s, and that even financial experts sometimes aren’t sure of exactly how a 401(k) functions. An IRA will come with a much higher degree of standardization, and—thus—simplicity.

A greater level of control. Do you have a good, effective 401(k)—or a bad one? That all depends on how the account is set up, invested, and administered. Unfortunately, most investors have little control over this; the employer handles everything, which can lead to frustrations. Rolling it into an IRA, and working closely with a financial advisor, can give you a bit more freedom and a bit more control.

More options for investment. Though there are countless investment options available to retail investors, most 401(k) administrators limit the available options to just a handful. Thus, there is more possibility, more choice present in an IRA, generally speaking.

Better estate planning options. Often, upon the accountholder’s death, a 401(k) is liquidated and paid in one lump sum to the beneficiary. This can land that beneficiary with a huge tax burden. Sometimes, though, an IRA will offer some additional distribution options.

Unified retirement holdings. Statistically speaking, most Americans change careers many times during their lives, holding—on average—five or six different jobs. That could mean ending up with multiple 401(k) accounts—but rolling everything into an IRA means all your retirement funds are in one place, which can be comforting and convenient.

Again, the decision to do a 401(k) rollover is highly individualized. Please be sure to speak to your advisor to carefully consider the differences between your company retirement account and investment in an IRA. These factors include, but are not limited to changes to availability of funds, withdrawals, fund expenses, fees, and IRA required minimum distributions.

Certainly, though, it is something worth talking about with your financial advisor; contact Stonepath Wealth Management today to set up a consultation.