Bring your investments and savings plans together
Combining your investment and savings plans together will help bring your finances into focus.
If you have a 401(k) or an employer-provided qualified retirement plan from a previous employer, one of your options is to roll over the funds into an IRA. This prevents you from paying taxes or withdrawal penalties when funds are transferred and could help you defer income taxes for years.
Reasons to consider rolling over to an IRA
More Investment Options
IRAs typically offer a broader range of investment options compared to employer-sponsored 401(k) plans. With an IRA, you have the flexibility to invest in individual stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other securities that may not be available in your 401(k).
Consolidation and Simplification
If you’ve changed jobs multiple times throughout your career, you may have several 401(k) accounts scattered across different employers. Consolidating them into a single IRA can make it easier to manage your retirement savings and keep track of your investments.
More Control
With an IRA, you have more control over your investments and the ability to make changes to your portfolio as needed. This can be particularly advantageous if you prefer to be more involved in decisions surrounding your retirement savings.
Roth Conversion
If you have a traditional 401(k) and are interested in converting some or all of your retirement savings to a Roth IRA, rolling over into a traditional IRA can be a prerequisite step. Roth IRAs offer tax-free withdrawals in retirement, which can be advantageous for certain individuals, especially if you anticipate being in a higher tax bracket in retirement.
Estate Planning Benefits
IRAs may offer more flexible options for estate planning, including the ability to designate beneficiaries and potentially avoid probate. This can help ensure that your retirement savings are passed on to your heirs according to your wishes.
Distribution Flexibility
If you’re over the age of 73, you must take required minimum distributions (RMDs) from your retirement accounts each year. With a traditional IRA, you have more flexibility in how you take these distributions compared to a 401(k), which may have stricter rules.
We can help you
Our advisors can walk you through the benefits of consolidating your investments and savings strategies. Contact a local advisor today.
Comparing your Individual Retirement Accounts (IRAs) options
| Plan Type | Advantages | Compare |
|---|---|---|
| Traditional IRA |
With a traditional IRA, money deposited into the account may be tax-deductible and is not subject to income tax until you withdraw your funds. This ability to delay when taxes are paid can be an advantage to some investors. |
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| Roth IRA |
In a roth IRA, the contributions you make have already been taxed and are not tax-deductible. Since you’ve already paid taxes on these funds, you are not subject to income tax at withdrawal. This means that the earnings your roth IRA generates are considered tax-free. You can even take certain early distributions without paying an early withdrawal penalty. If you have had your roth IRA for more than 5 years and are at least 59 ½ years old, distributions from the account are tax-free and penalty free. |
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| Rollover IRA |
If you have a 401(k) or an employer-provided qualified retirement plan from a previous employer, one of your options is to roll over the funds into an IRA. This rollover IRA prevents you from having to pay taxes or withdrawal penalties at the time funds are transferred and could help you defer income taxes for years. You may also have more investment choices available to you than were offered in your employer-provided retirement plan. |
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| Inherited IRA |
An IRA can offer advantages as a way to pass down money to your family or other beneficiaries. IRS regulations allow the ability to extend IRA benefits over time, with options for annual payments for the life of the recipient or for a fixed number of years. There is also the option of a lump sum payment, or for spouses, rolling over the inherited IRA into their own IRA. If you’re inheriting an IRA, or planning to leave one behind, we’re glad to discuss your options with you. |
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Investment decisions may have tax implications. Always consult a qualified tax advisor for personalized guidance.