So you have a retirement account with your old employer, what can you do with it?

As with all financial planning questions, there is no one size fits all answer here. What to do with an old retirement account depends on a few factors. The first thing you need to know is what your options are. You can’t pick the best option for yourself without first knowing your choices right?

Most of the time there are 4 options when deciding what to do with a retirement account from a previous employer. You can leave money where it is and do nothing with it until you retire. You can roll the money from the old retirement plan into your new company's retirement plan. You can roll the money from your old retirement account into a ROLLOVER IRA. Or you can withdraw money from the account and pay a 10% early withdrawal penalty and income tax on the funds you withdraw (This choice is most likely NOT going to be your best option. Additionally this penalty only applies to early withdrawal for people under the age of 59 and 1/2). Each option has its pros and cons and the right option for you depends on a few criteria.

The first thing you need to do is compare the costs. How much does your new retirement cost you compared to your old one? If your old employer pays the fees on the retirement plan and your new employer doesn’t, then it might not make sense to roll the money out and pay a fee you weren’t paying before. Similarly if your old employer had the employees paying the fees and your new employer doesn’t then why wouldn’t you want to roll the money out and pay less? Another cost to compare is how much it would cost to move the money to a rollover IRA. It might cost more for an advisor to manage a rollover IRA, but your advisor should also be bringing additional value that outweighs the additional cost.

The second thing to consider is the fund lineup offered in each retirement plan. Is the list of funds available in the new plan better than the funds available in your old plan? If so it might be beneficial to roll out, and if it is a worse fund lineup then it might be better to keep the money where it is. Another option to consider is that a rollover IRA has a much wider variety of investment options. As I mentioned above the fee will be higher for a rollover IRA, but if you receive the added value of a good financial advisor and a custom built portfolio it may be worth the higher fee for a higher benefit.

As you can see there is a lot to consider before knowing what the best option is for you. Every retirement plan is different, just like every person's situation is different.

If you or someone you know is trying to figure out what to do with a retirement account at an old employer, reach out to me for a complimentary consultation and discussion.

Disclosure:

The opinions from this article are my own and don't necessarily represent Redwood private wealth's positions, strategies or views. This article is for educational purposes only and should not be taken as financial advice. For financial advice specific to your current situation please schedule an appointment with me.