IRA Rollovers: In Your Best Interest?Jul 19, 2021
Increasing Regulatory Scrutiny
An area of increasing regulatory scrutiny is retirement plan rollovers to IRAs. This is a common transaction, and done every day, but it just might not be in your best interests. Why? Several factors:
Reasons Why NOT to do a rollover IRA
- If your plan at work is covered by ERISA legislation (Employee Retirement Income Security Act) – typically a profit sharing or 401K – it has complete creditor protection, no matter the balance. An IRA will have limited creditor protection, typically up to the amount needed to maintain your lifestyle.
- Loans are permitted from employer plans. No loans ever from IRAs.
- Early withdrawal penalties of 10% apply to retirement plans before age 55. It is age 59 ½ for IRAs. So if you are age 55, separated from service, and rolled your retirement funds into an IRA, you’ve just given yourself 4 ½ years of 10% withdrawal penalties.
- If you are going to a new job, you can often transfer your account from your previous employer’s plan to the new employer’s plan, thereby retaining all the advantages mentioned above.
- Higher fees paid to a Registered Investment Advisory firm rather than within the employer plan.
Reasons TO DO a Rollover IRA
On the other hand, there are compelling reasons to do a rollover IRA:
- A huge range of investment options, including cryptocurrencies. If it is traded on a secondary market, we can get it for you in your account. This includes shares of start-up companies that could potentially explode.
- RIA fees are fully disclosed and transparent. In your employer plan, they are disclosed somewhere in the plan documents. Either way, they are netted out of your return.
- An IRA account with an RIA firm such as CameronDowning also gets you the a personal advisor, who knows you and your circumstances, and is actually pleased to meet with you periodically (at least annually) over the years to serve your best interests and reevaluate as life changes come your way.
- Distributions from your IRA are easy. We can set them up to be periodic (weekly, semi-monthly, monthly, etc.) with electronic transfer to your checking account. You can vary the amount of tax withheld. All it takes is a call to your adviser.
You May Not Have a Choice
You may not have a choice here; it all depends upon the plan. In some employer plans if you are no longer employed there they want you to get your money out right away. In others, they allow you to continue participating in the plan into retirement or even for life. So knowing what you have and how it works is crucial for making a wise decision.
Here at CameronDowning we have a fiduciary responsibility to help you weigh all these factors so that you can make an informed decision that is in your best interests.
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