Is an IRA Rollover Right for You?

If you’re like many people, you may have an old 401k or other defined-benefit retirement plan sitting with a former employer and you may be wondering whether an IRA rollover is right for you. While you’re likely to get a lot of opinions about what to do, it’s not always as clear-cut as it seems.

Should you rollover your plan?

If your balance is small, you may not have a choice. If you have less than $5,000 in your account, your former employer can force you to rollover the plan. If your balance is less than $1,000, the plan is allowed to send you a check, creating a taxable event. If either of these scenarios apply to you, you will want to proactively manage what happens to avoid triggering a taxable event and potentially an early withdrawal penalty.

If your balance is greater than $5,000, you have options. Here are some things to consider to help you make your decision.

Available Investment Options

IRA RolloverWith employer-based retirement plans, the available investment options are selected by the employer. While employers do have a fiduciary responsibility to ensure there is a proper mix of investment options available to allow diversification, you’re limited to choosing from the available selections. Rolling over your account would allow access to a wider choice of investment options.


Fees can eat into your investment returns. Even if you leave your account with your former employer, you will be subjected to fees for managing your account. Would the fees be less if you rolled over the account?

Rollover Balance

Does your balance limit your rollover options?

Many fee-based financial advisors require a certain investment level before they will work with you, such as $100,000. Some financial companies will not even allow an advisor to take a client whose account balance is less than $50,000. They require these accounts to be serviced by call-center employees only.

If you don’t already have an established relationship with an advisor, is your balance high enough to be able to work with a fee-based advisor, or will you have to pay an up-front commission or be subject to contingent deferred sales charges?

Should you consider not rolling over your plan

If your account has an outstanding loan balance, if you rollover your account, the outstanding loan balance will be declared income, and would be subject to taxes and potentially early withdrawal penalties.

There are other factors that also need to be considered, which is why it’s a good idea to review your options with a qualified tax professional before making any decisions. Let us help you with your decision. Contact us for more information.