If you have retired or changed jobs, you may have questions about what to do with the money in your employer retirement plan. You typically have four options: Leave It– Leave the money in your former employer’s plan, Move It– Move the money to your new employer’s plan, Roll It– Roll over the money to an IRA, and Take It– Cash out the account, subject to tax consequences. Although taking your money is an option, you should avoid doing so in most circumstances because taking it now means it won’t be there when you need it in retirement. Plus, if you take your money, you will generally have to pay taxes on the withdrawal, and there is typically an additional 10% tax penalty if you are under age 59½, unless you left your employer in the calendar year you turned age 55 or older. Your other three options – Leave It, Move It, or Roll It will allow your retirement dollars to continue to grow on a tax-deferred basis, but there are some differences. As you consider your options, it’s important to consult with your tax professional before making any decisions.
You can compare these three options using the bullets below.
I am no longer with my employer. Is this option available to me?
Leave It – It depends on the terms of your plan.
Move It – It depends on whether your current employer has a plan and the terms of the plan.
Roll It – Generally yes
What will it cost?
Leave It or Take It – Fees and expenses for your employer plan may include: Administrative fees, Investment-related expenses, which vary depending on the types of investments and services you select, and Distribution fees. These fees and expenses may be lower than the fees and expenses you would pay in an IRA. Contact your plan administrator to learn more about your plan’s fees.
Roll It – Edward Jones IRA fees generally include: An annual account fee, Investment-related expenses, which vary depending on the types of investments and services you select, and Termination fees.
Will I be able to add money (up to the annual limits)?
Leave It – It depends on the terms of your plan.
Move It – Generally yes, but you may have to meet certain plan requirements before you can. This option also allows you to consolidate your retirement accounts, which may make it easier to monitor your investments and simplify account information at tax time.
Roll It – Generally yes, as long as you meet certain income and age requirements. This option also allows you to consolidate your retirement and other accounts, which may make it easier to monitor your investments and simplify account information at tax time.
What investment options will I have?
Leave It or Move It – Plans typically have a limited number of investment options that are selected by the employer but may include investments you can’t get through an IRA.
Roll It – IRAs typically have a broader range of investment options than employer plans, but employer plans may offer investments you can’t get through an IRA.
What types of services are available?
Leave It or Move It – It depends on the plan. For example, some plans may offer educational materials, planning tools, telephone help lines and workshops. Your plan may or may not provide access to a financial advisor.
Roll It – Through our face-to-face approach to serving clients, your Edward Jones financial advisor can help you identify and implement strategies to help you reach your financial goals.
When can I take money without tax penalties?
Leave It or Move It – Generally at age 55, if you leave your employer in the calendar year you turned age 55 or older.
Roll It – Generally at age 59½
When do I have to take money?
Leave It or Roll It – Generally at age 70½
Move It – Generally at age 70½, unless you are still working at the company.
Will the money in my account be protected from creditors?
Leave It, Move It, or Roll It – Assets held in employer plans and those held in IRAs may have different levels of protection under the law. For more information, consult your attorney or tax professional.
What if I have employer securities?
Leave It, Move It, or Roll It
If you have stock/securities of your former employer that have increased in value from your original investment, you may be able to receive special tax treatment on these securities. This is referred to as net unrealized appreciation (NUA). If you roll the employer stock into an IRA or move it to your new employer’s plan, the ability to use the NUA strategy is lost. NUA rules are complex. If you are considering NUA, we suggest consulting with a tax professional prior to making any decisions on distributions from your existing plan.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
