Andy summarizes the pros and cons of rolling over an employer plan (such as a 401(k), 403(b), 401(a), 457 or the federal Thrift Savings Plan) to an IRA or Roth IRA. To sum up:
Potential PROS of rolling over an employer plan to an IRA or Roth IRA:
- More investment options
- Likely lower fees and costs
- Access to professional advice
- Better control over tax withholdings
- More withdrawal options
- Less Required Minimum Distributions ("RMDs") to manage
- Less financial clutter
Potential CONS of rolling over an employer plan to an IRA or Roth IRA:
- May lose the ability to take early distributions without penalty
- May lose the ability to cleanly do backdoor Roth IRA contributions
- May lose the ability to continue to delay RMDs from that plan (if you're still working at that employer)
- Lose the ability to take loans from the money
- May lose the ability to take advantage of Net Unrealized Appreciation ("NUA") of company stock
- May lose access to a stable value or managed income portfolio investment option
- Potentially less creditor protection
Links in this episode:
- Summary of the creditor protection of IRAs and Roth IRAs by state - here
To send Andy questions to be addressed on future Q&A episodes, email andy@andypanko.com
