Why Roll Over?
Benefits of Consolidating Old Retirement Plans into an IRA
By Joseph J. Bilello

      Like many people, you have probably changed jobs a few times during your career and have multiple IRA and 401(k) accounts. While it may not be high on your priorities list, there are many benefits to consolidating your accounts. Here are a few that could make it well worth the effort.
Expand Your Options & Control

      To achieve an optimum portfolio mix among asset types and sectors, you and your advisor have to work around what the 401(k) managers are doing. The greater number and size of your old retirement plans, the more impact their allocations have on your overall portfolio. Your old 401(k) fund may also contain investments in companies that participate in business practices that you consider objectionable. Rolling over your retirement plans to an IRA puts all those investment decisions under your control.

Streamline Your Management
When you roll over prior employ
er retirement plans and multiple IRAs to one master IRA account, you consolidate the enormous amount of paperwork that is associated with each account. Also keep in mind that each 401(k) has its own unique rules and regulations established by your company in the account plan documentation.

Management Fees
      While you may incur custodial fees to close some old accounts, you should save on annual fees. The combined total account value may also entitle you to additional discounts or break points.

Gain Better Access to Funds
      Depending on the plan documentation, there may be significant restrictions to withdrawing assets from retirement plans. However, when money is rolled over into an IRA, you decide when to take distributions or convert to a Roth IRA. For distributions prior to age 59½, money may be free of IRS early withdrawal penalties if removed for certain circumstances such as first-time home purchase or for higher education expenses.
      Note that one advantage of 401(k) plans for current employees is the ability to borrow from the plan, an option not available on IRA accounts.

Charitable Planning Options
      The Pension Protection Act of 2006 enables IRA owners over the age of 70½ for the tax years 2006 and 2007 to make direct distributions to qualified charities without having to count those distributions as income. There are numerous philanthropic, tax, and estate planning opportunities created by this new legislation which are applicable to IRAs but not to 401(k) and 403(b) accounts. If you or someone you know is age 70½ or older and gives to charity, using IRA distributions for charitable giving can be beneficial not only to the donor and charity but to the donor’s heirs as well.
     
As with most federal tax programs the IRA rules are extremely complex. Mistakes made here can have a dramatic effect on your financial outlook today and well into the future. Yes, you should take the time to plan for your IRA accounts. With all the reasons to roll over your retirement assets, the most important is freedom to manage your assets according to your own goals and values.
Joe Bilello, ChFC, CEP, RFC, is certified by and a charter member of Christian Financial Professionals Network (CFPN) and is President of Avanti Wealth Management and can be reached at 407-331-7330.