During your lifetime
By rolling over your employer-sponsored plan an IRA, you are no longer limited to the allocation options selected by the employer's plan. You can decide which options are the best fit for you given your specific retirement time line, the return you would like to achieve, and the level of risk with which you are comfortable. Employers often decide which allocation options to offer within their employer-sponsored plan based om minimized their fiduciary liability. For you, however, this may be your entire retirement nest egg, accumulated over many years, providing the only means of funding the retirement lifestyle you would like to live. Make sure you work with a financial services professional to decide what strategy is best for you.
Consolidate for easier money management
If you have several retirement plans from former employers, you may choose to consolidate your retirement accounts into a single rollover IRA to simplify managing your assets during retirement.
For your beneficiaries
After your death, a rollover IRA can mean more control over how your remaining IRA assets are distributed to your beneficiaries. Assets can be distributed to match the financial circumstances of each of your beneficiaries.
Before age 59 1/2
Most distributions taken from a retirement plan before age 591/2 will be subject to a 10% premature distribution penalty along with the income taxes due at the time the funds are distributed. There are, however, certain circumstances where withdrawals from a retirement plan prior to age 591/2 are allowed with no additional tax penalties. Ask your financial professional about all the options available, including in-service distributions and substantially equal periodic payments (SEPPs).
At age 70 1/2
Required minimum distribution rules apply once you reach age 701/2 , and you may be subject to significant taxes and penalties if distributions are not taken as required.
Pre-1987 after-tax contributions
If your 401(k) balance includes pre-1987 after-tax contributions, you may be able to receive a separate check for these contributions and roll the after-tax dollars directly into a Roth IRA in a tax-free transaction. Ask your financial professional for more details.
Company Stock
If you hold employer securities in your retirement plan, you may be able to reduce your overall income tax liability by taking distribution of the company stock before rolling over the balance of your plan over to an IRA. Ask your financial professional for more details on "net unrealized appreciation".
Estate Planning
You may have other assets adequate for retirement so that you don't require the funds in your IRA for living expenses. If so, there are options for creating a strategy that can extend your IRA assets to your beneficiaries, providing future financial security for your children or grandchildren. Ask your financial professional about a stretch distribution strategy.
