Qualified Plan Rollovers to IRAs

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Take greater control of your retirement assets when you leave a job by rolling them over to an IRA.

The Northern Trust Institute

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Deciding what to do with retirement assets after leaving your employer can seem overwhelming. But understanding your options can help you make an informed decision based on your unique goals and income needs.

Types of IRAs

The most common types of IRAs are Traditional and Roth. The key differences between the two are their tax treatment and distribution requirements. For Traditional IRAs, a required minimum distribution must generally be taken annually beginning at age 72, otherwise you may incur penalties.

wealth management traditional roth

Rollover Options

To help you determine which rollover option might be right for you, following is a summary of the benefits and considerations for each:

Leave your savings where it is

Advantages:

Simplicity; there’s nothing more to do
401(k) assets are fully protected from creditors
Assets can continue to grow tax-deferred

Considerations:

Unable to contribute additional funds
Plan may have limited investment options
Could lose track of account after transitioning from former employer
May not receive timely communications about any plan changes

Roll it over into your new employer’s 401(k) Plan

Advantages:

Combining accounts is easier to manage
401(k) assets are fully protected from creditors
Assets can continue to grow tax-deferred

Considerations:

New plan may have limited investment options
The new employer’s plan may not allow a transfer from another retirement plan

Roll it over into an IRA

Advantages:

May have more investment options
IRA participant is guaranteed up to $1 million exemption from creditors’ claim in federal bankruptcy, but state law regarding creditor protection may vary
You maintain control
May have access to professional guidance
Ability to combine several accounts in one institution
Assets can continue to grow tax-deferred

Considerations:

You have to initiate the process
You (or your advisor) choose the investments
Depending on where you choose to roll it over, cost may be higher or lower
Must be “like-to-like”, i.e., Roth 401(k) to Roth IRA

Cash out or withdraw early

To understand more about the various treatment of Traditional and Roth IRA and 401(k) accounts, please see Common Retirement Account Options.

Is an Employer Retirement Plan to IRA rollover right for you?

There are situations when rolling over from an employer retirement plan to an IRA could be advantageous:

Consolidating your accounts in one place provides simpler management and ease of accounting
A rollover of your retirement plan funds into an IRA may provide a larger selection of investing options
No taxes will be withheld from your rollover amount if the plan administrator transfers the assets directly to another qualified plan or traditional IRA

Considering a rollover to Northern Trust?

If you are interested in rolling over assets to Northern Trust, we can offer the following solutions:

Northern Trust IRA – work with a portfolio manager in our Wealth Management business to create an investment approach based on your unique situation and goals.
Northern Trust Securities, Inc. IRA – work with our financial advisors to create an investment portfolio that’s right for you.