Rollover IRAs


What to know about Rollover IRAs

Your 401(k) investment may represent years of salary deferrals and be a sizable part of your financial support during retirement. If you change jobs or retire, you may be eligible to roll over your 401(k) investments to an Individual Retirement Account (IRA), known as a rollover IRA. An IRA can be a great way to get more flexibility in managing your investments. While IRAs are a different type of retirement account than a 401(k), they offer many of the same tax advantages.

Advantages of rolling a 401(k) over to an IRA

  • Investments retain their tax-advantaged status. Generally, traditional 401(k) accounts roll into traditional IRAs and Roth 401(k) accounts roll into Roth IRAs.
  • You may have access to a broader variety of investment choices than in your 401(k).
  • You may be able to consolidate these investments with other financial accounts.
  • Certain circumstances allow penalty-free IRA distributions before age 59½.

Things to consider

  • Transaction and account maintenance fees may apply in an IRA.
  • Withdrawals prior to age 59½ are subject to a 10% early-withdrawal penalty and ordinary income taxes unless an exception applies.
  • Unlike 401(k) plans, investments in an IRA may not have creditor protection.
  • Rolling over assets to an IRA is just one of several choices investors have in determining what to do with their old retirement plans. The four options are:
    • Leave assets in a former employer’s plan, if the plan allows
    • Move assets to a new employer’s plan, if the plan allows
    • Cash out/take a lump-sum distribution (taxes and penalties may apply)
    • Roll over to an IRA
  • When considering rolling over assets from an employer plan to an IRA, factors that should be considered and compared between the employer plan and the IRA include fees and expenses, services offered, investment options, when penalty-free withdrawals are available, treatment of employer stock, when required minimum distributions begin, and protection of assets from creditors and bankruptcy. Investing and maintaining assets in an IRA may involve higher costs than those associated with employer-sponsored retirement plans. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.

Any tax or legal information on this website is merely a summary of our understanding and interpretations of some of the current income tax regulations and is not exhaustive. Investors should consult their tax advisor or legal counsel for advice and information concerning their particular situation. Allspring Global Investments does not provide accounting, legal, or tax advice or investment recommendations.

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