A former employee may be able to leave money in the old plan, move it to a new employer plan, roll it into an IRA, or take a distribution. The last option can trigger tax and penalty consequences.
Compare the investment menu
Institutional plan funds may be inexpensive, while an IRA can offer more choice. More choice is not always better.
Use a direct rollover when appropriate
Moving funds directly between custodians can avoid withholding and reduce the chance of an accidental taxable distribution.
Check special features
Loan balances, creditor protections, company stock, and early-withdrawal rules can affect the decision.
Sources
- Internal Revenue Service, Rollovers of Retirement Plan and IRA Distributions.
- U.S. Department of Labor, Retirement Plan Choices After Leaving a Job.