Roll into Retirement

In 2003, 43 percent of workers who took a lump-sum distribution from their employer's retirement plan rolled the entire sum into another tax-qualified account, up from 19 percent in 1993.¹ The traditional IRA was by far the most popular destination for rollover money, accounting for more than 70 percent of recent lump-sum rollovers.²

When leaving their jobs, most employees are faced with the choice of leaving money in their employer-sponsored retirement plans, withdrawing the money (and possibly incurring tax penalties), or rolling the money into other retirement plans.

Wealth of Options

In addition to continued tax deferral, IRA rollovers are attractive to investors for several reasons, most notably the wealth of investment options that may be available.

Many employer-sponsored plans offer limited investment options, but a traditional IRA can hold almost any investment, with certain exceptions such as your residence and "collectibles" (e.g., stamps and antiques).

Traditional IRAs also tend to offer greater flexibility than employer plans. You can change investments as your preferences change, rather than having to work with a slow-moving bureaucracy to change your retirement plan profile. Also, you don't have to worry about your investment options changing, as they sometimes do in employer plans.

Remember that distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income and may be subject to an additional 10 percent federal income tax penalty if taken prior to reaching age 59½.

Just as retirement offers you more choices for how to spend your time, an IRA rollover can offer you more ways to invest your money. Call today to discuss rolling your assets from an employer-sponsored plan to an IRA.

1) Journal of Financial Planning, June 2006
2) Employee Benefit Research Institute, January 2006