Is an IRA Rollover Right for You?

An IRA rollover allows you to move funds from one Individual Retirement Account (IRA) into another IRA without tax penalties. This can be an advantageous maneuver in many situations, but is not right for everyone. Asking yourself the following key questions can help you decide if a rollover makes sense for your needs or if you should stay put.

Do you want to switch IRA providers?

If you are dissatisfied with investment options, fees, or customer service at your current, initiating a rollover can allow you to transition to a new provider that better aligns with your needs. Check that account minimums and other eligibility requirements at the new custodian will be met once the funds are rolled over.

Do you need to consolidate IRAs?

If you have retirement funds spread across multiple IRA accounts, an IRA rollover provides a way to consolidate everything under one account. This simplifies tracking and managing all your savings in one place. Ensure the new custodian offers equivalent or better investment choices before consolidating 401ks or SIMPLE IRAs via rollover.

Have your needs or goals changed?

A rollover gives you a chance to revisit your investment strategy if your risk tolerance, time horizon, or objectives have changed. Transferring funds to a new account allows you to reallocate across new investments that match your current goals. Consult with a financial advisor when reassessing your investment portfolio.

Does your employer offer a 401k?

You cannot roll IRA funds back into a 401k once you have completed an IRA rollover with those assets. If you think you may want 401k access later, carefully weigh this limitation before rolling over into an IRA.

Are you satisfied with your performance?

If your current IRA investments are performing well and meeting your needs, it may make sense to leave the funds in place rather than moving them. Transitioning via rollover takes time and paperwork. Don’t fix what isn’t broken.

Have you reviewed all fees?

Compare fees charged by custodians and investment options on both ends – exit fees from the old IRA and any new account or investment fees you may incur. A rollover should provide net savings over the long-term after factoring these expenses.

Does your employer require IRA rollovers?

Some employer retirement plans mandate that funds from their plan be rolled over into an IRA upon leaving the company. Make sure to understand any such requirements before initiating a rollover.

How close are you to retirement?

If you plan to begin distributions soon, it may make sense to keep funds where they are instead of rolling to a new custodian right before starting withdrawals. But a rollover can provide more investment flexibility on distribution options.

Are your beneficiary designations in order?

Update or confirm your beneficiaries on the new account after a rollover. Also, make sure beneficiary assets go into properly titled inherited IRAs for non-spouse beneficiaries to maintain tax advantages.

The Bottom Line

Analyzing your specific needs and situation is key to deciding if an IRA rollover is right for you or if remaining with your current custodian is better aligned with your goals. Rollovers involve time, paperwork, and careful attention to IRS rules. But they can provide benefits like investment flexibility and consolidated retirement asset management. Weigh the pros and cons carefully as part of your retirement planning process.