What Should You Review Before Rolling Over an Employer-Sponsored Retirement Plan?

Leaving a job brings many changes, including big decisions regarding your retirement savings. While moving your funds to a new account might seem like the logical next step, it is important to pause and evaluate the details first. Rolling over an employer-sponsored plan involves specific rules and potential costs that could impact your long-term savings. Harvest Wealth Partners can assist you in reviewing these critical factors carefully before you proceed.

• Comparing plan fees and expenses
• Evaluating investment choices
• Understanding tax implications
• Knowing when you can access your funds

How Do Fees and Costs Compare?

One of the first items to review is the cost difference between your current plan and a potential new account. Employer plans often benefit from institutional pricing. This can mean lower expense ratios for the funds offered within the plan.

An Individual Retirement Account (IRA) might carry different administrative fees or higher costs for certain funds. It is vital to compare these expenses side-by-side to understand if a move makes financial sense. You should look for:

• Account maintenance or annual fees
• Fund expense ratios
• Transaction charges for buying or selling investments
• Advisory fees for managed accounts

What Investment Options Are Available?

Employer plans often provide a curated menu of funds selected by the plan administrator. This selection might be limited compared to the open market, but it can also be sufficient for many investors.

An IRA opens the door to a broader universe of stocks, bonds and mutual funds. You should determine if you need access to a wider range of asset classes or if your current plan offers adequate diversity for your needs. Consider if you prefer:

• A simplified list of choices
• Access to specific sectors or individual stocks
• The ability to utilize different investment strategies

Are There Tax Implications to Consider?

Taxes play a significant role in your decision. If your employer plan includes company stock, rolling it over to an IRA might cause you to lose out on Net Unrealized Appreciation (NUA) tax treatment. This specific rule allows you to pay capital gains tax on the earnings of the stock rather than ordinary income tax, which can result in savings.

Additionally, moving pre-tax money to a Roth IRA triggers a tax event. You must include the converted amount in your gross income for that tax year. You must understand the immediate tax bill versus the potential long-term benefits before making such a transfer.

When Can You Access Your Funds?

Accessibility rules differ between employer plans and IRAs. If you leave your job at age 55 or older, you might be able to take penalty-free withdrawals from your 401(k). This is known as the “Rule of 55.”

An IRA requires you to wait until age 59½ to withdraw funds without a 10% penalty, with only a few exceptions. Also, employer plans may offer loan provisions that IRAs do not. If you anticipate needing to borrow from your retirement savings or access the funds before age 59½, keeping the money in your employer plan might be the appropriate choice.

Ready to Discuss Your Retirement Strategy?

Making a decision about your retirement assets requires a thorough review of the facts. At Harvest Wealth Partners, our mission is to help you construct a financial plan that aligns with your specific goals. We can help you navigate the complexities of fees, taxes and investment choices. Contact us today to schedule a conversation about your future.