You may find that you have accumulated a number of workplace retirement accounts over the years. Consider consolidating these assets into a single rollover IRA to simplify your life and help you take better control of your financial future.
Thanks to favorable tax laws, your retirement plan assets can be as mobile as you are. If you are like most people, you have probably worked for a number of different employers. And you might not always have taken your retirement plan assets with you to your new job. Therefore, you might have several workplace retirement accounts — even different types of accounts if your previous employer was a nonprofit organization that offered a 403(b) or a government organization that offered a 457 plan.
For anyone who has worked for a variety of employers, it may make sense to consolidate retirement assets, and it is easy to do so. Consider a woman who worked as a police officer after college, then seven years later decided to become a teacher, and then five years later, decided to pursue a career as a book editor at a for-profit publishing firm. She might have retirement assets in a 457 plan from her years as a police officer, money in a 403(b) plan from her time as a teacher and investments in a 401(k) offered by her current employer, the publishing firm.
Now she might consider consolidating those assets. She can transfer the money in her 457 and 403(b) plans into a rollover IRA or into her current employer’s 401(k) plan if the plan permits.
Keep in mind that each retirement plan may have its own rules concerning employees’ access to money and the acceptance of assets from previous employers’ retirement plans. In some cases, it may be disadvantageous from a tax perspective to commingle assets from different types of plans
How you choose to handle your retirement assets could have a lasting impact on the size of your nest egg and ultimately on the type of retirement you can enjoy. Because this decision is so critical, most people seek out professional advice when they are leaving a job. Your financial advisor or investment professional and accountant can help you assess your options so you make the best choice. When you leave an employer, you generally have four options for handling the money in your retirement plan.
Both employer plans and rollover IRAs may involve fees and investment-related expenses. In some cases, an employer may pay for the plan’s administrative expenses and provide additional levels of service when compared to an IRA. For assistance in determining which option is appropriate for you, consult your financial advisor or investment professional.
For many people, the most appealing option is to transfer retirement plan money into a rollover IRA. This choice may make a lot of sense for a number of reasons.
When changing jobs or retiring, you are likely to be preoccupied with plenty of concerns. In the midst of these major transitions, you will have to make a major decision about how to handle your retirement plan assets. Staying informed and turning to the support of financial advisors or investment professionals could help ensure that you make the best decision for yourself, your family and your future.
If you are rolling money over to an IRA, be sure to ask your former employer to make the check payable to the institution at which you are establishing the IRA. If it is made payable to you, your retirement plan distribution will be subject to 20% withholding. When you open the rollover IRA, you must invest the full amount of your distribution and come up with the missing 20% yourself. Even if you complete the rollover within the required 60 days to avoid income and penalty taxes, you will not be credited with the amount withheld until you have filed your tax return.
Wondering what to do with your retirement assets when you change jobs or retire? If you have multiple accounts at multiple firms, consider consolidating your retirement assets in one rollover IRA to simplify your life. Here are some major potential advantages a consolidated approach offers:
You may access the MFS Heritage Planning® infosheet “An IRA Dilemma: To Roll or Not to Roll” on mfs.com. This infosheet details your options for handling retirement assets when you change jobs or retire.
By phone or on the Internet
IRS Publication 590-A. See specifically the section titled “Can You Move Retirement Plan Assets?” This publication can be found on the Internal Revenue Service Website at irs.gov. Or you can call the IRS at 1-800-829-1040.
There are advantages and disadvantages to rolling money out of your employer’s plan and into an IRA. You will need to consider how your retirement goals may be affected by features such as investment options, services, fees and expenses, withdrawal options, required minimum distributions and tax treatment. Please be aware that rolling over retirement assets into one IRA account could potentially increase fees, as the underlying funds may be subject to sales loads, higher management fees, 12b-1 fees and IRA account fees such as custodial fees. For assistance in determining if a rollover to an IRA is appropriate for you, consult your financial advisor or investment professional.
1 The amount of money in your IRA that is protected in bankruptcy is limited to $1,362,800 (through 2022) plus any amount rolled over from a qualified plan.2 A non-spouse beneficiary who inherits an IRA does not get the same level of creditor protection as the original owner in most cases. The level of protection, if any, varies under state law
MFS Fund Distributors, Inc. is not affiliated with LPL Financial or StrateFi Wealth Management.
This material is provided for general and educational purposes only and is not investment advice. The investments you choose should correspond to your financial needs, goals, and risk tolerance. Please consult a financial advisor or investment professional before making any investment or financial decisions or purchasing any financial, securities or investment related service or product, including any investment product or service described in these materials.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy. Investing involves risks including possible loss of principal.
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