The third way to preserve the tax-deferred benefit of your retirement account is to rollover into an IRA. It is important to find out about the types and range of investments available through a particular IRA and the services being offered for the fees being charged before choosing an institution for your IRA.
An IRA Rollover may offer you the most flexibility for your accumulated savings. Some of the benefits of choosing an IRA include:
- Continued tax-deferred growth of your account.
- You may be able to convert all or a portion of your account to a ROTH IRA.
- You may have access to a better variety of investment choices and/or access to a professional advisor to provide you with personalized advice on investing and retirement planning.
- An IRA is your account and you have full discretion over your money including deciding which financial institution, investments and services to use – and whether to make changes in the future.
- With an IRA you may choose to consolidate your other tax-deferred retirement accounts in one place. This may be helpful for your financial and retirement planning and for managing the Required Minimum Distributions (RMDs) you will have to start taking when you reach age 70-½.
- IRAs are generally more flexible than plans on withdrawals and distributions, e.g., setting up regular periodic withdrawals or an unscheduled withdrawal.
- IRAs are easily transferable between financial institutions – so if you don’t like the one you are with, changing to another provider is usually easy.
- IRAs offer penalty-free withdrawals for certain educational expenses and first-time home purchases, but they are still taxable.
- If you select an Individual Retirement Annuity, you can obtain a guarantee of lifetime income.
- There is no plan fiduciary who prudently monitors the cost and quality of the investment options of an IRA, unless you hire one.
- Some IRAs will require you to select your own investments and may or may not provide help in the selection process.
- Depending on the provider and the services provided, you may pay more in an IRA for investments, services and advice than you would pay through a retirement plan. Compare those costs to your plan’s fees for services, investments and administration.
- You cannot borrow from an IRA – you can only access the money in an IRA by taking a distribution (usually taxable), which may also subject you to early withdrawal tax penalties if you are younger than 59-½.
- While protected in bankruptcy, IRAs generally do not offer the same level of creditor protection as employer-sponsored retirement plans.
Not sure, how to go about opening an IRA to receive your rollover? Let us help you!