ABOUT HOSTS

Matthew Horsley
ABOUT Matthew

Matt Horsley has been serving individuals and families to meet their retirement, estate, investment and tax planning needs since 1993. Matt currently serves as an Investment Advisor Representative with Pure Financial Advisors, LLC where he works directly with clients to help them realize their specific financial objectives. Prior to joining Pure Financial Advisors, Matt served [...]

Do you have a 401(k) plan from an old employer and are not sure what to do with it? Matthew Horsely, CFP ® describes the advantages and disadvantages of keeping your money in the 401(k) versus rolling it into an IRA.

Transcription:

“So today we are going to talk about some of the considerations with regard to 401(k) plans versus IRA plans. In particular, if you have a 401(k) plan from a former employer.

So what many people are not aware of is that there may be some advantages of keeping your money in your 401(k) plan versus rolling it to an IRA.

Number 1: Depending on your age, with an IRA you cannot access the money inside of those accounts until age 59 and 1/2. If you do, you will be subject to a 10% penalty plus ordinary income tax.

With a 401(k) plan, if you have funds still in your 401(k) plan and you have left that employer, you can pull your money out starting at age 55. So that’s about a 4 1/2 years earlier that you have access to your money if it’s in your 401(k) plan versus an IRA.

Now that might be the only reason you keep your money in a prior employer’s 401(k). So the advantages of rolling your money to an IRA are many.

The first is, inside of a 401(k) you typically have very limited investment options. If you roll the money into an IRA, with Fidelity, Vanguard, TD Ameritrade, Charles Schwab, whoever. Now you have a world of investment options available to you. You can manage those accounts on your own according to your own goals.

Number 3: Many times within 401(k) plans, the fees with those investment options are much higher than those fees that you could likely obtain on your own inside of your own IRA.

Lastly, if you want to have your accounts professionally managed, typically you cannot do that with a 401(k) plan. With an IRA, you can hire a competent advisor to take care of your IRA and manage those accounts according to your goals to make sure you are financially successful.

The last thing I want to mention with regard to 401(k) plans, and many people are not aware of this, is most people think that ” If I am still working, I have to leave my money in my 401(k) plan until I retire, regardless of what age I am.”

So if you are over age 59 1/2 and still working, you can actually roll the full balance, typically, of your 401(k) plan into an IRA. Now you have the universe of investment options to choose from, can manage those on your own according to your goals, and still make ongoing contributions to your 401(k) plan.

Again, lots of consideration with regard to what options make the most sense for you. You should seek competent counsel. For more information, go to purefinancial.com.”