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Your Bank > Education and Advice > CNB University

Should You Roll Your 401(k) to an IRA?

M Mazzochetti
Mark S. Mazzochetti, CISP is Vice President - Retirement Services Officer and can be reached at MMazzochetti@CNBank.com or (585) 419-0670 x50606.

If you’re entitled to a distribution from your 401(k) plan (for example, because you’ve left your job, or you’ve reached age 59½), and it’s rollover-eligible, you may be faced with a choice. Should you take the distribution and roll the funds over to an IRA, or should you leave your money where it is?

Across the Universe

In contrast to a 401(k) plan, where your investment options are limited to those selected by your employer (typically mutual funds or employer stock), the universe of IRA investments is virtually unlimited.

Take It Easy

The distribution options available to you and your beneficiaries in a 401(k) plan are typically limited.

With an IRA, the timing and amount of distributions is generally at your discretion. While you’ll need to start taking required minimum distributions (RMDs) from your IRA after you reach age 70½ (and your beneficiary will need to take RMDs after you die), those payments can generally be spread over your (and your beneficiary’s) lifetime.

A rollover to an IRA may let you and your beneficiary stretch distributions out over the maximum period the law permits, letting your nest egg enjoy the benefits of tax deferral as long as possible.

Give Me Shelter

Your 401(k) plan may offer better creditor protection than an IRA. Assets in most 401(k) plans receive virtually unlimited protection from creditors under a federal law known as ERISA.

Let’s Stay Together

Another reason to roll your 401(k) funds over to an IRA is to consolidate your retirement assets. This may make it easier for you to monitor your investments and your beneficiary designations, and to make desired changes.

Seek Professional Guidance

This summary covers only a few of the issues needing consideration. What is right for you depends on your personal circumstances. Contact us today at 585-419-0670.

This material is provided for general information purposes only and is not a recommendation or solicitation to buy or sell any particular security, product or service. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.

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