If you are a Moog employee and are currently thinking about retirement, you will need to decide whether to leave your 401(k) in Moog’s RSP+ account, or roll it over to an IRA. Additionally, Moog’s retirement plan allows for partial rollovers upon reaching age 59.5, so even if you are still employed, it may make sense to roll funds into an IRA. Here are the pros and cons of a 401(k) rollover:
- Account Consolidation
Moving one or more retirement accounts into an IRA reduces the probability of losing track of your investments. Neglecting accounts can result in a mishmash of investments, including redundant positions or asset allocations out of line with your overall risk tolerance and financial planning goals. By consolidating accounts, it is easier to manage investments and track account performance.
- Investment Selection
Most employer retirement plans offer a limited selection of investment options, specifically with bond and alternative investment funds. While Moog has a solid lineup of stock funds, they only offer two bond funds. As you approach retirement, you will want to shift towards a more conservative investment allocation that may require a broader menu of bond or alternative investment options.
Even though Moog offers a generous array of stock funds, individual stocks cannot be purchased in RSP+ accounts. In today’s low rate environment; we use individual stocks as an alternative to bonds to generate income. You can read more about our approach here.
- You Want to Retire Early
If you plan to retire early, it may be a good idea to keep your 401(k) if you need to access the money. Upon separation of service, you can access the funds penalty free at age 55. However, distributions from an IRA are subject to a 10% penalty until age 59.5.
- You Want to Retire Late
Upon reaching age 72, you are subject to Required Minimum Distributions (RMDs) from your IRA or 401(k), which are subject to income taxes. However, if you are still employed (and less than a 5% owner of the company) your 401(k) is not subject to the RMD rules. This means that you can continue to defer taxes until you retire.
- Loss of Creditor Protection
Assets in 401(k) and other qualified retirement plans are protected from creditors. If someone wins a judgment against you in a personal injury lawsuit, your retirement account is exempt from the lawsuit. In some states, this is a moot point. For example, New York extends creditor protections to IRAs. However, if you are planning to move to a different state, you will need to check the protection that your state covers. Some states offer no protection or only exempt an amount necessary to support you in retirement. Proper insurance planning can mitigate the risks of judgment. Our team can analyze your current insurance coverage to ensure your assets are protected in a lawsuit.
A rollover decision is a complex and dependent with your individual situation. Fortunately, we can help make a decision that fits your needs. Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees. We are experts in your benefits plans and will work to give you a seamless transition into retirement.
Learn more about Ogorek Wealth Management and our unique approach by scheduling a time to meet.
Gain comfort in one of the most important decisions in your life.