Change jobs a few times and it's easy to end up with retirement accounts scattered across old employers. Combining them can make life simpler, but it's worth checking a few things first.
Your options
For each old plan, you generally have four choices: leave it where it is, move it to your current employer's plan, roll it into an IRA, or cash it out. Cashing out usually triggers taxes and, if you're under 59½, may add a penalty, so it's rarely the best move.
Five things to compare
- Costs. Look at plan administration fees and the expense ratios of the funds you're in.
- Investment choices. Some plans offer a short menu. An IRA usually offers more.
- Protections. Employer plans and IRAs can have different protections from creditors, depending on your state.
- Age 55 rule. If you leave a job in or after the year you turn 55, that employer's plan may allow penalty-free withdrawals that an IRA would not.
- Company stock. If you hold your former employer's stock, special tax treatment may apply. Check before you move it.
Do it the right way
If you do roll over, a direct transfer from plan to plan, or plan to IRA, avoids mandatory withholding and the 60-day deadline that comes with taking a check yourself. Roth money should go to a Roth account, and pre-tax money to a pre-tax account.
Why it's worth the effort
One view of everything makes it easier to see your real mix of investments, avoid accidental overlap, and plan withdrawals later. Our two-minute check-up is a good place to start.
This article is for general education and is not individualized investment, tax or legal advice. Rollover decisions depend on your circumstances; compare costs, services and protections before deciding. Consult your tax professional.
