Rollover Into Your New Employer’s Plan
Another option for preserving the tax-deferred status of your retirement money is to rollover your account to a new employer’s plan. While most employer plans allow new employees to roll their accounts in, not all do and it is important that you ask. (This option will not be available if you are retiring and will no longer be working)
You should ask about the administrative and other fees assessed to participants’ accounts in the new employer’s plan and compare them to your alternatives.
Advantages
You may wish to rollover your balance in your new employer’s plan if:
- You will be making contributions to your 401(k) at your new employer and wish to consolidate your retirement savings to make asset allocation and tracking your accumulated savings easier.
- Your new employer has more favorable investment options or pays some of the expenses associated with maintaining the plan (again, not all employers do).
- Your new employer’s plan may have loan provisions. If you rollover into the plan, you may be able to borrow from the rollover money in the new plan.
- If you have an existing loan, you may be able to roll it over into your new employer’s plan. This is rare and you should check with the plan administrators of both your former and new employers’ plans.
- Employer-sponsored plans generally offer better creditor protection than IRAs. Keeping your retirement account in another employer-sponsored plan helps you maintain the creditor protection.
- While employed, you will not be required to begin taking Required Minimum Distributions (RMDs) when you attain age 70-½ (unless you are a 5% or greater owner in the business).
Disadvantages
Some things to be aware of:
- The new plan may not allow incoming rollovers or if it does, there may be a waiting period.
- Your new employer’s plan investment offerings may be more expensive or otherwise not be to your liking,
- The new plan may not offer personalized advice on investments, retirement planning, or your other investments.
Once rolled over, your previous account becomes part of the new plan; subject to the rules of that plan. Make sure you understand the potential impacts, particularly related to your ability to withdraw your funds in the future.