Is a Rollover Right for You?
December 11, 2015
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. For additional information, call Washington Trust Wealth Management at 800-582-1076.
The opinions expressed in this newsletter are those of the author and may not reflect those of The Washington Trust Company. The information in this report has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Any opinions expressed herein are subject to change at any time without notice. Any person relying upon this information shall be solely responsible for the consequences of such reliance. Performance is historical and does not guarantee future results.
1 - Asset allocation and diversification do not ensure a profit or protect against a loss.
2 - There 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.
Any views or opinions expressed are those of Washington Trust Wealth Management. The information provided does not constitute legal, tax, or investment advice and it should not be relied on as such. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. Please consult with a financial counselor, attorney, or tax professional regarding your specific investment, legal, or tax situation. It should not be considered a solicitation to buy or an offer to provide investment advisory or other services. All information is current as of the date of this material and may change at any time without prior notice. The information provided is solely for informational purposes and has been obtained from sources believed to be reliable but its accuracy is not guaranteed.