To Roll or Not to Roll


Financial planners generally recommend that you roll over your 401(k) into an IRA when you leave a job – but there may be some important exceptions to consider before doing so. Like every aspect of financial planning, a rollover isn’t a one-size-fits-all solution.

Here are some pros and cons of rolling or keeping your old 401(K).

Reasons to Roll Over

  • It is more difficult to keep track of multiple retirement accounts that are spread among different employer plans.
  • An IRA at firms such as Vanguard and Fidelity usually offer many more investment options.
  • You can borrow from an IRA penalty free to pay certain educational expenses and some medical expenses in excess of 7.5% of adjusted gross income.
  • You may not be able to withdraw assets from a 401(k) plan in retirement as often as you can with an IRA.

Reasons to Keep a 401(k) With a Former Employer

  • If you leave your job after turning 55, you can tap into your 401(k) but it’s harder to withdraw from your IRA without penalty before age 59 1/2.
  • If you plan to work after age 70 1/2 your minimum required distributions (RMD) can be postponed from a 401(k) but not from an IRA.
  • Large, well-managed 401(k) plans may offer lower investment expenses than an IRA.
  • You may face tax consequences when rolling over your 401(k) if your plan contains large amounts of company stock.

As always, we recommend talking to your financial and or tax advisor if making the decision leaves you flummoxed.