Options for your retirement plan savings


If you will be taking a distribution from a company retirement plan such as a 401k plan, perhaps due to an upcoming career change or pending retirement, you will be faced with important decisions about your retirement savings. Be sure to carefully weigh both the immediate and longer term impacts of each option before determining which is most appropriate for you. Know that what you choose to do with your current retirement savings can have a substantial impact on your future.

You generally have four options for your retirement plan distribution:

  • Roll over your assets into an Individual Retirement Account (IRA)
  • Leave your assets in your former employer’s plan, if allowed by the plan
  • Move your assets directly to your new employer’s plan, if allowed by the plan
  • Take your money out and pay the associated taxes

Each of these options has advantages and disadvantages and the one that is best depends on your individual circumstances. You should consider features such as investment choices, fees and expenses, and services offered. A Wunderlich financial advisor can help educate you regarding your choices so you can decide which one makes the most sense for your specific situation.

The summary below and more detailed information accessible by link from this page provide a general overview of these options, but do not include all the information you may need to consider based on your individual needs and retirement goals. Under certain circumstances, a combination of these options may be the best choice for you.

Before you make a decision, read the information provided here to become more informed and speak with your current retirement plan administrator and tax professional before taking any action.

Option 1 — Roll your retirement savings to an IRA
Rolling your money to an IRA allows your assets to continue their tax-advantaged status and growth potential, the same as in your employer’s plan. In addition, an IRA often gives you access to more investment options than are typically available in an employer’s plan and investment advice. Your financial advisor can support you in your retirement planning process by providing the guidance to make better, informed decisions.
❯ LEARN MORE ABOUT THE IRA ROLLOVER OPTION


Option 2 — Leave your retirement savings in your former employer’s plan
While this approach requires nothing of you in the short term, managing multiple retirement accounts can be cumbersome and confusing in the long run. And, you will continue to be subject to the plan’s rules regarding investment choices, distribution options, and loan availability. If you choose to leave your savings with your former employer, remember to periodically review your investments and carefully track associated account documents and information. LEARN MORE ABOUT STAYING PUT


Option 3 — Move your retirement savings directly to your new employer’s plan
If you are joining a new company, moving your retirement savings to your new employer’s plan may be an option. This may be appropriate if you want to keep your retirement savings in one account, and if you’re satisfied with the investment choices offered by your new employer’s plan. This alternative shares many of the same advantages and considerations of leaving your money with your former employer.
LEARN MORE ABOUT MOVING TO A NEW RETIREMENT PLAN


Option 4 — Take a lump-sum distribution (taxes and penalties may apply)
You should carefully consider all of the financial consequences before cashing out your retirement plan savings. The impact will vary depending on your age and tax situation. If you absolutely must access the money, you may want to consider withdrawing only what you will need until you can find other sources of cash. LEARN MORE ABOUT LUMP SUM DISTRIBUTIONS


 Evaluating your retirement plan distribution choices
 
May be best for you if you want:
Choices to consider
Roll assets
into an IRA
Leave assets
in previous
employer’s
plan
Move assets
to new
employer’s
plan
Take a
lump-sum
distribution
Generally lower fees and expenses
More investment choices with broader diversification opportunities

To delay RMDs after age 70½ if still employed
To take advantage of potentially favorable tax treatment of appreciated
employer securities

To avoid current income taxes and IRS early distribution tax penalties
To continue making contributions
To maintain the account’s tax-advantaged status until distributions
are taken
Continued protection from creditors offered by ERISA
To consolidate all of your retirement account assets into one account

To avoid the 10% IRS tax penalty if you turn age 55 or older in the year you
leave your company (age 50 or older for certain public safety employees)
To avoid the 10% IRS tax penalty for qualified higher education
expenses or as a first-time homebuyer*


To keep current investment choices and services offered
Flexible distribution options

Immediate access to your retirement money, and are willing to pay
applicable taxes and penalties


*IRA exceptions to the IRS 10% tax penalty are for age 59½, death, disability, Substantially Equal Periodic Payments (SEPP), eligible medical expenses, certain unemployed individuals’ health insurance premiums, qualified first-time homebuyer ($10,000 lifetime maximum), qualified higher education expenses, Roth conversions, qualified reservist distribution, or IRS levy.

With you every step of the way

Everyone has a different vision of retirement that requires a unique financial strategy. Wunderlich can support you in your retirement planning process by providing the guidance needed to make better, informed choices. We will meet with you and help create a comprehensive plan that takes into account your complete financial picture. Your financial advisor will be with you every step of the way to monitor your progress and adapt your plan as needed. Working together, we’ll design and implement a retirement plan that will help you live out your unique vision of retirement.



When considering rolling over assets from an employer plan to an IRA, factors that should be considered and compared between the employer plan and the IRA include fees and expenses, services offered, investment options, when penalty-free distributions are available, treatment of employer stock, when required minimum distributions begin, and protection of assets from creditors and bankruptcy.

Investing and maintaining assets in an IRA will generally involve higher costs than those associated with employer-sponsored retirement plans. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.

The material has been prepared for informational purposes only. It is based on current tax information and legislation as of August 2014 and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Investors need to make their own decisions based on their specific investment objectives, financial circumstances, and tolerance for risk. Please contact your financial professional and/or tax advisor for more information on planning for retirement. Our firm does not provide tax or legal advice. Be sure to consult with your own tax and legal advisors before taking any action that may have tax or legal consequences. Accounts carried by First Clearing. First Clearing is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.