401(k) Rollover Evaluator

Thinking about rolling over a 401(k)? Let us help you evaluate.  Use our rollover evaluator to better understand your options and make a more informed decision.

We can help you evalute whether you should:

  • Leave it in your current 401(k) account
  • Roll it over to a new 401(k) account
  • Roll over to an IRA – and which one
  • Withdraw and take a lump sum

After using this evaluator, you will know:

  • The important criteria that you should take into consideration
  • Pro’s and Con’s for each
  • Additional Tips and Considerations

See which option is best for you now.  We can even email you the evaluator for easy future access. Just input your email below.

When do you want to withdraw money?

  • Rolling Over to Another 401(k)
  • Pros:

    No penalty tax for withdrawals after age 59½.

  • Cons:

    If you decide to rollover to another 401(k) now and then decide later to withdraw from this account early, just beware of the penalties in doing so. Withdrawing money before age 59 ½ means tax penalties. There is a mandatory 10% penalty tax, in addition to ordinary income tax on the withdrawal, unless you are at least 55 and leaving your job. The extra income from the withdrawal could push you into a higher income tax bracket, increasing your overall taxes for the year. Unless your withdrawal qualifies for one of the withdrawal exceptions, it is best to leave in the account vs. withdrawing.

  • Rolling Over to an IRA—but which one?
  • Pros:

    You can withdraw Roth IRA contributions at any time for any reason without tax consequences. However, any investment gains on those contributions are subject to taxes if withdrawn before age 59 ½.

    The Internal Revenue Code allows withdrawals under limited circumstances, like buying a home or paying for college. See IRS website for information.

  • Cons:

    For Traditional IRAs withdrawals before age 59 ½ are subject to 10% penalty—with few exceptions.

    For a Roth IRA only, if you withdraw earnings before 59½ you will be subject to a 10% early withdrawal penalty. In addition, you can't withdraw investment earnings from your IRA until you have had it open for at least 5 years, counted from the first day of the tax year of the first contribution. However, you can withdraw your contributions

    .Distributions from a SIMPLE IRA, if taken before the age of 59 ½ and within 2 years of participation, are subject to an additional 25% tax penalty. If you participation is longer than 2 years but still under 59 ½ the additional tax penalty is reduced to 10%.

  • Taking a Lump Sum
  • Pros:

    While there is no penalty for withdrawals, consider income taxes and lost opportunity for account growth when deciding whether and when to take a lump sum.

  • Cons:

    Unless you are 55 and leaving the company, you will be required to pay a 10% penalty tax on your withdrawal in addition to ordinary income taxes. The withdrawn amount could put you in a higher income tax bracket, which would mean paying a higher percentage of tax on all income for the year of the withdrawal. Plus, you lose out on additional tax deferred growth.

  • Keeping in 401(k)
  • Pros:

    No penalties for withdrawals after age 59½.

  • Cons:

    Unless you are at least 55 and leaving the company, there will be a 10% penalty tax, in addition to ordinary income tax, on the withdrawal. The withdrawn amount will be included in your income for the year, and it may put you in a higher tax bracket, which would apply to all of your income for the year of the withdrawal.

Have you borrowed from your current 401(k)?

  • Rolling Over to Another 401(k)
  • Cons:

    If you have an outstanding loan you need to pay it back before rolling it over—or pay a 10% additional penalty tax on the amount not repaid.

  • Rolling Over to an IRA—but which one?
  • Cons:

    Outstanding loans must be repaid before rollover, or there is a 10% penalty.

  • Taking a Lump Sum
  • Cons:

    Repay any outstanding loan balance before taking a lump sum distribution, or you would be responsible for a penalty tax of 10% in addition to ordinary income taxes.

  • Keeping in 401(k)
  • Cons:

    If you leave the company and haven't paid back your loan, you will incur a penalty. If it isn't too late, increase your loan payback contributions so you can pay it back before you leave the company. Once you leave, you may not be allowed to pay the loan back and will likely incur the penalty.

Employer Stock

  • Rolling Over to Another 401(k)
  • Additional Considerations:

    If you have an outstanding loan you need to pay it back before rolling it over—or pay a 10% additional penalty tax on the amount not repaid.You can roll it over to your new 401(k) or you might want to sell it and roll the proceeds into a your new plan.

    One thing to consider is NUA (Net Unrealized appreciation). If you are thinking about rolling over your stock to a tax deferred account, it will eventually be taxed at your ordinary income tax rate, once you take distribution of the stock. If you roll over your company stock shares into a taxable account, according to IRS rules, your shares will only be charged as income based on the cost bases or what you originally paid. For example, if you paid $5 and the stock is now worth $10, you only pay income tax on $5 vs. on the $10 you would eventually pay if you rolled it over to a tax deferred account.Note, to qualify for NUA, you must rollover shares vs. sell and reinvest dollars. Once rolled over to the taxable account, you can sell at any time and the only other tax you will pay on this asset is long-term capital gains on the appreciation. NUA can come as a tax advantage and may make sense for you if you have an immediate cash need or the stock has greatly appreciated.Be aware that you should seek tax advice if you wish to immediately sell the transferred shares from your brokerage account, because this could result in additional taxes.

  • Rolling Over to an IRA—but which one?
  • Pros:

    No matter what you decide to do with company stock, you can still rollover the rest of your balance of your 401(k) that is not a portion of your company stock and continue to receive tax deferral benefits on past and future growth.

  • Additional Considerations:

    If you have company stock in your 401(k), weigh your options carefully. Use the NUA (Net Unrealized Appreciation) strategy to determine whether you should roll over into an IRA. Rolling over into an IRA may cost you more in taxes vs. using the NUA strategy for the portion of your account that is in company stock.

  • Taking a Lump Sum
  • Cons:

    The sale of company stock is subject to capital gains tax, in addition to income tax.

  • Keeping in 401(k)

Fees

  • Rolling Over to Another 401(k)
  • Cons:

    There are administrative fees, and investment options are often more limited than they are in an IRA, which could mean higher fees.

  • Rolling Over to an IRA—but which one?
  • Pros:

    Fees vary, but typically administrative fees are lower for IRAs than for 401(k)s, so you could reduce your costs by moving to an IRA. You may also get more control over investments, including the ability to select those with lower fees, which may also reduce your investment costs.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    Once you are no longer an employee, you could be charged additional fees for trading and rebalancing your account.

Does your 401(k) allow any after-tax contributions?

  • Rolling Over to Another 401(k)
  • Cons:

    Investment earnings on after-tax money in a traditional 401(k) are taxed.

  • Rolling Over to an IRA—but which one?
  • Pros:

    With the new IRS guidance, when rolling over, you can take the pre-tax contributions and roll over to a traditional and the after-tax to a Roth. This could be beneficial for your after-tax contributions since the gains will be tax free vs. tax-deferred like in a Traditional IRA.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    Investment earnings on after-tax money in a traditional 401(k) are taxed.

Does the plan allow for Direct Rollovers?

  • Rolling Over to Another 401(k)
  • Cons:

    If the rollover is indirect, where a check from the plan is made out to you, the plan is required to withhold 20% for your income taxes. Direct Rollovers, where the money is sent directly to your IRA provider, do not require tax withholding.If you receive a check and wait more than 60 days to complete the rollover, the money will be considered a distribution and you will be responsible for any additional taxes and penalties not covered by the 20%.

  • Rolling Over to an IRA—but which one?
  • Cons:

    Indirect transfers are subject to 20% tax withholding which is really a pre-payment of income taxes, but direct transfers are not. Verify that the plan transfers your account to the new institution (not to you) to avoid this withholding. If you wait more than 60 days to complete an Indirect Rollover, the money will be considered a distribution and you may have taxes and penalties to pay in addition to the 20% withheld.

  • Taking a Lump Sum
  • Keeping in 401(k)

Investment Options

  • Rolling Over to Another 401(k)
  • Cons:

    You have less control over investment options and, depending on the plan, your choices can be limited. If you don't like what is offered or you don't like the fees, you still have to pick from the selections offered.

  • Rolling Over to an IRA—but which one?
  • Pros:

    You have more control; if you don't like the fees or investment selection, you can select different funds or even a new IRA.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    You have less control over investment options. You must choose from the options given, even if you don't like what is offered or you don't like the fees.

Direct or Indirect Rollover

  • Rolling Over to Another 401(k)
  • Rolling Over to an IRA—but which one?
  • Additional Considerations:

    Make sure the 401(k) plan writes the check to your new IRA provider, rather than to you. Otherwise, the plan will withhold 20% as a pre-payment for income taxes. If you wish to maintain the tax-deferred status of the money and forward it to your IRA, you will need to send the entire amount, which will mean coming up with cash to make up for the 20% withheld. This must be done within 60 days of the withdrawal, or any portion not rolled over will be considered a distribution. Distributions before age 59 ½ are subject to a 10% penalty tax, as well as ordinary income taxes, and the 20% withheld may not cover your entire tax obligation.

  • Taking a Lump Sum
  • Keeping in 401(k)

Changing from pre-tax to Roth

  • Rolling Over to Another 401(k)
  • Rolling Over to an IRA—but which one?
  • Pros:

    If you have a Roth 401(k), you can directly roll over funds to a Roth IRA. There are no tax issues and you get to keep all of your tax benefits.

  • Cons:

    If your 401(k) account consists only of pre-tax contributions and gains thereon, in general, you will owe taxes on the amount you convert to a Roth account. That amount will be included in your gross income for the year. If you have a high balance in your 401(k) and you decide to convert, be careful: your income tax bracket could jump up and you will be required to pay the higher tax rate on your entire income, including any plan distributions, for the year.

  • Additional Considerations:

    Check with your Plan to see if it allows conversions to a Roth; some plans have "no Roth rollover" rules.

    Before you convert, be sure to review your income situation for the year and your tax bracket. Will the Roth conversion send you into a higher tax bracket? Look into options where you convert a portion of your balance each year for a few years to avoid a higher bracket by converting all in the current year. Seek tax advice from a qualified tax professional.

  • Taking a Lump Sum
  • Keeping in 401(k)

Beneficiaries

  • Rolling Over to Another 401(k)
  • Cons:

    There are typically minimal to no beneficiary benefits with an employer Plan because these options create administrative burdens for the employer.

  • Rolling Over to an IRA—but which one?
  • Pros:

    You can benefit from a "stretch-out IRA" which allows retirement money to outlive you, stretching over the life of your IRA beneficiary, who may be much younger than you. If you roll over to a Roth IRA, your beneficiaries will receive the same stretch-out, and with the Roth, your beneficiaries will be able to withdraw tax free for life.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    There are typically minimal to no beneficiary benefits with an employer plan, because of the additional administrative burden.

Changing jobs

  • Rolling Over to Another 401(k)
  • Cons:

    Job changes may result in multiple retirement accounts for you to track. Consolidating into your new employer’s 401(k) is an option. But if you change jobs again, you will have to go through the process again—maybe several times. And, not all plans allow such transfers.

  • Rolling Over to an IRA—but which one?
  • Pros:

    With each job change you may accumulate another retirement account, complicating your financial life. By moving everything to an IRA you consolidate into one account, making tracking and managing retirement accounts easier.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    Job changes may result in multiple retirement accounts for you to track. This makes it easy to miss important communication from each plan, and difficult to maintain your overall retirement strategy.

Borrowing from your plan funds

  • Rolling Over to Another 401(k)
  • Pros:

    You can take a loan if the Plan allows, but there are penalties if you default. Repayments you make are not pre-tax and, if you quit or lose your job, you typically have a small amount of time to repay the loan. If you don’t repay, the default amount is taxable.

    You may be able to take a five-year loan from your 401(k) plan, without penalty, as long as you pay it back on time.

  • Rolling Over to an IRA—but which one?
  • Pros:

    Since loans are not allowed with an IRA, any dollars you "borrow" from your IRA account are considered an early withdrawal and subject to the 10% penalty fee. But unlike a 401(k), you are not required to pay it back. There are some exceptions that apply to withdrawals from IRA; to see these visit the IRS website.

    If you want to need to take a loan from your IRA, you could roll it over to new IRA and take advantage of the 60 days you have to roll it over before the loan becomes a taxable distribution. However, you would need to pay the loan back in order to roll over the full amount no later than 60 days after the distribution is made in order to avoid any withdrawal penalties.

    Roth IRA contributions (though not any investment gains on them) can be withdrawn at any time and for any reason, without penalty. There are additional provisions that allow for borrowing without penalty from a Roth (see the IRS website).

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    Once you have separated from the employer you are unlikely to be able to borrow from your account because you won’t have access to payroll deductions.

RMD impact

  • Rolling Over to Another 401(k)
  • Cons:

    At age 70 1/2 you must begin taking RMDs—Required Minimum Distributions—unless you still work at the company. Every withdrawal means less opportunity for investment gains.

  • Rolling Over to an IRA—but which one?
  • Pros:

    A Roth IRA is not subject to the RMD (Required Minimum Distribution) at age 70 ½, giving you more control over your withdrawal choices. Your money can continue to be invested, so there is more opportunity for investment gains.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    Unless you still work for the company, you must begin taking RMD's at age 70 ½. This reduces your opportunity for investment gains.

Does your employer allow it?

  • Rolling Over to Another 401(k)
  • Cons:

    Some plans do not allow rollovers from previous employer plans. And, you may have to meet eligibility requirements i.e., time on the job, before you can roll money in.

  • Rolling Over to an IRA—but which one?
  • Taking a Lump Sum
  • Keeping in 401(k)
  • Cons:

    Many employers either don't allow you to keep the money in the plan or have minimum balance requirements in order to keep your money in the Plan.

Vesting of matching contributions

  • Rolling Over to Another 401(k)
  • Additional Considerations:

    Be sure to understand the vesting schedule for your matching contributions. If you can wait until they are fully vested before changing jobs, you won’t lose out on any dollars credited to your account but not yet vested.

  • Rolling Over to an IRA—but which one?
  • Additional Considerations:

    Be sure to understand the vesting schedule for your matching contributions. If you can wait until they are fully vested before changing jobs, you won’t lose out on any dollars credited to your account but not yet vested.

  • Taking a Lump Sum
  • Additional Considerations:

    Be sure to understand the vesting schedule for your matching contributions. If you can wait until they are fully vested before changing jobs, you won’t lose out on any dollars credited to your account but not yet vested.

  • Keeping in 401(k)
  • Additional Considerations:

    Be sure to understand the vesting schedule for your matching contributions. If you can wait until they are fully vested before changing jobs, you won’t lose out on any dollars credited to your account but not yet vested.

Future potential value or opportunity cost

  • Rolling Over to Another 401(k)
  • Cons:

    May require more paperwork and more effort on your part.

  • Rolling Over to an IRA—but which one?
  • Pros:

    No current tax liability and continued tax deferral on the full amount of your plan savings; It remains tax deferred, so you don't pay taxes on it until withdrawn from your IRA.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Additional Considerations:

    Some plans restrict ability to manage your savings and limit distribution options, so be sure you understand any limitations. You may be unable to take a partial withdrawal, but instead be required to leave all of your money in the plan or take all of it out. There may be transaction limits, and you can no longer make new contributions to the plan because you are no longer an employee.

Protection from creditors

  • Rolling Over to Another 401(k)
  • Pros:

    In general, ERISA protects your 401(k) account from creditors, even in a bankruptcy. Only an IRS action or a divorce decree can get past the ERISA protection of your account.

  • Rolling Over to an IRA—but which one?
  • Pros:

    Money rolled over from your 401(k) is protected in the event of a bankruptcy.

  • Cons:

    Depending on where you live, your IRA may not have the same protection from creditors as it did when in the 401(k).

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Pros:

    In general, ERISA protects your 401(k) account from creditors, even in a bankruptcy. Only an IRS action or a divorce decree can get past the ERISA protection of your account.

Additional income tax implications to think about

  • Rolling Over to Another 401(k)
  • Additional Considerations:

    When it is time to withdraw - you’ll have to pay taxes on your original contributions and on the account’s earnings. When rolling over to a new 401(k), you are deciding to pay taxes later vs. now.

  • Rolling Over to an IRA—but which one?
  • Pros:

    For a Roth IRA, not only do you not have to pay income tax on your plan contributions from your 401(k) rollover (which was never tax-deductible in the first place), but your investment earnings will not be subject to income taxes either.

  • Additional Considerations:

    For Traditional IRA, you can deduct the total amount you contribute for the year, giving you a tax break now. You will pay income tax on withdrawals in the future.

    For a Roth IRA, you receive no deduction now, because you contribute after-tax money. But, future withdrawals are without tax.

  • Taking a Lump Sum
  • Keeping in 401(k)
  • Additional Considerations:

    When you eventually withdraw the money, you will have to pay taxes on your original contributions and on the account’s earnings. Your decision is whether to pay taxes later or pay them now.

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