Should My Money Stay or Go? Employer 401(k) vs. IRA Rollover

Employers are the newest contenders for the rollover assets from your retirement plan. Here’s what to consider when leaving your job and choosing whether to leave your money in your old employer’s defined contribution plan or roll it over to an IRA.

A man stands on a stepping stone where the path diverges ahead.
(Image credit: Getty Images)

We have all seen the ads from banks, discount brokers, mutual funds companies and insurers touting the benefits of rolling over your defined contribution plan balance to an IRA. Now a new contender for your plan assets is in the ring. Citing features such as low fees, access to institutional funds and the value of fiduciary oversight, employers are now encouraging participants to leave their money in their DC plan — even after leaving the company.

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Row 0 - Cell 0 Employer plan invested in Vanguard Institutional Index Plus Shares (VIIIX)Row 0 - Cell 2 Rollover IRA invested in Schwab® S&P 500 Index Fund(SWPPX)
Account balances$100,000Row 1 - Cell 2 $100,000
Fund expense ratio0.02%Row 2 - Cell 2 0.02%
Annual investment fees$20Row 3 - Cell 2 $20
Record-keeping fee$40Row 4 - Cell 2 $0
Total annual cost$60Row 5 - Cell 2 $40
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FeatureQualified PlanRollover IRA
Allow for Net Unrealized Appreciation on In-Kind Distributions of Employer Stock to be taxed at Capital Gains ratesXRow 0 - Cell 2
Allow for partial distributionsAllowed but may not be permitted by individual planX
Allow for monthly repayment of outstanding loan balance after termination of employmentAllowed but may not be permitted by individual planRow 2 - Cell 2
Protected from creditors*XWill vary by state

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Alan Vorchheimer is a Certified Employee Benefits Specialist (CEBS) and principal in the Wealth Practice at Buck, an integrated HR and benefits consulting, technology and administration services firm.  Alan works with leading corporate, public sector and multi-employer clients to support the management of defined contribution and defined benefit plans.