Participants of qualified employer-sponsored retirement plans (e.g., 401(k), profit sharing, 403(b), etc.) typically have several options when deciding what to do with their retirement plan assets upon termination of service with the sponsoring employer. Such options include:
|EMPLOYER-SPONSORED RETIREMENT PLAN||IRA|
|INVESTMENTS||Number and type may be restricted by the plan. If mutual funds, less expensive institutional share class may be used. Review your most recent statement.||May include a broader array of products, including stocks, bonds, mutuals funds, ETFs, and limited option strategies.|
|FEES||What are investment expenses? Advisor expenses?
Are administration/recordkeeping fees charged to participants, or does the employer pay them? Charge for distributions to an IRA?
Review the 404a-5 disclosure (Investment Comparative Chart).
|Annual Custodial Fee. Stifel = $40/year; $30/year if househeld for statement purposes with another account. Transaction and/or advisory fees that vary depending on the product and/or program selected.
Fees and expenses associated with an IRA are generally higher than those associated with an employer-sponsored plan; thus, a detailed comparison of such fees is an important consideration in any decision-making process.
|SERVICES||Do you have access to investment advice and education, planning tools, telephone help lines, educational materials, and workshops?
Review the recordkeeper’s website.
|Do you have access to planning tools, telephone help lines, educational materials, advice, full brokerage services, and financial planning?|
|PENALTY-FREE WITHDRAWALS||At age 59½. Prior to age 59½, may be subject to penalties unless you separate from service in the year you attain age 55 or after. Some penalty exceptions may apply.||At age 59½. Some penalty exceptions may apply.|
|TAXATION||Ordinary income tax applies for distribution, unless rolled over to another eligible plan or IRA. No tax for qualified Roth or after-tax distributions. May roll Roth or after-tax directly to Roth IRA.||Ordinary income tax applies for distribution (exception for qualified Roth distributions and after-tax contributions).|
|REQUIRED MINIMUM DISTRIBUTIONS (RMDs)||Generally must begin at age 72, but may be delayed until retirement, if still employed by plan sponsor and not a 5% or greater owner of the company. RMDs may not be rolled over to an IRA or another qualified plan.||Must begin at age 72 (exception for Roth IRAs).|
|EMPLOYER STOCK||Tax benefits available for distribution of shares of highly appreciated stock (Net Unrealized Appreciation election).||N/A|
|LOANS||May be available while still employed.
Review the plan’s Summary Plan Description (SPD)
|No loans permitted.|
|PROTECTION FROM CREDITORS||Generally, unlimited protection from creditors under federal law.||Protection up to roughly $1 million in bankruptcy proceedings only; state laws vary.|
|ROTH CONVERSIONS||Plan may allow for Roth contributions as well as in-plan conversions (depending on the plan document). Conversions are typically taxable as ordinary income in the year they are processed.||Roth conversions are always available and typically taxable as ordinary income in the year they are processed.|