Stay or Roll Over? What to Do With Your Old Retirement Accounts

Our clients received a copy an article on what to do with your old retirement
accounts written by S&P Capital IQ Financial Communications[1].  What follows is a synopsis.

If you've changed jobs a few times over the years, you could have several retirement accounts housed in different employers' plans. While it is acceptable to leave money in an old plan, sometimes it may be a better idea to consolidate your assets. (If your account is less than $5,000, your old employer can cash you out, making it necessary to have a backup destination.) Having your retirement portfolio in one place can facilitate tracking its performance, ensure proper asset allocation, and make timely changes.[2]  Initiating a rollover is easy. If you are planning to roll over assets into an IRA, contact your financial advisor or the financial institution that will house your account. They will have you fill out a form or have a representative help you with the process.  If you are planning to roll over your assets into your current employer's plan, first check your current plan rules to confirm that rollovers are permissible (the vast majority of workplace retirement plans accommodate rollovers).  If not, contact the administrator of your old plan(s) (this information should be on your statements) to start the process.

Comparison Shop

Compare the investment options of your old and new plans -- and/or any IRA option you are considering -- and their associated fees before you start the rollover process. 

• Diversification: Did your old plan allow for proper diversification of investments? If your investment choices were limited, you may want to move your money.
• Fees: Are the investment fees in your old plan higher or lower than in your new plan? If you were paying more for the investments in your old plan, you can save money by moving your assets.

Distributions: A Last Resort

There is a very important difference between a rollover and a distribution. A rollover allows you to transfer your money from one “qualified” retirement account to another without incurring any tax consequences (or requiring any tax withholding).  A qualified account can be either your new employer's plan or a rollover IRA.  A distribution is a withdrawal from your account. If you request a distribution, the account administrator is required by law to withhold 20% of your account balance to pay federal taxes. State taxes, if applicable, are also due. If you are under age 59½, you could be subject to an additional 10% federal early withdrawal penalty. You can roll over assets from a distribution within 60 days of receipt and reclaim those tax withholdings. If you wait longer than 60 days, a rollover is not permissible.

To see additional Regency investment, planning, and wealth management articles, quotes, and newsletters please visit us at http://www.regencywealth.com/news. Andrew M. Aran, CFA Mark D. Reitsma, CFP®, CMFC Timothy G. Parker, CFA

[1] S&P Capital IQ Financial Communications

[2] Asset allocation and diversification do not ensure a profit or protect against a loss in a declining market.