What You Need to Know About Rolling Your 401(k) to an IRA
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
When you change jobs, everything you need to take with you can be neatly packed into a box – except your retirement plan. When you leave your job, you need to think about rolling your 401(k) into an IRA (Individual Retirement Account). If you left your job to make aliya, this question becomes even more crucial, as cross-border financial regulations come into play with keeping the tax-beneficial status of American retirement accounts.
What are your options?
If you leave your American job to move to Israel, you have four options for your 401(k):
• Keep the money with your former employer’s 401(k) plan,
• Roll your funds into an IRA,
• Roll your money into your new employer’s plan if it’s allowed,
• Cash out your 401(k) plan by withdrawing all your money (not recommended).
The best course of action depends on your financial situation, your attitude about managing your own retirement funds, where you will live, and the specific plan options available to you. What are the pros and cons of rolling your 401(k) plan into an IRA?
Advantages of an IRA Rollover
There are several reasons why rolling your 401(k) into an IRA may be advantageous. An IRA gives you more control over your specific investments, as they tend to offer more investment options than a typical 401(k) plan. Furthermore, you can easily manage an IRA from overseas.
Disadvantages of an IRA Rollover
If you want access to your retirement funds before age 59½, you may prefer to keep your funds in your 401(k) or roll them into your new employer’s 401(k) plan (if available). If you are younger, you might want to take advantage of the fact that 401(k) withdrawals are allowed at age 55. Or, if you are happy with your current investments, it may be better to leave them where they are rather than rolling them over to somewhere else.
Before changing any retirement plan, make sure to consult with a financial advisor and tax professional to understand the tax consequences of any move you make. To learn more about IRAs, read: ProfilePerspectives.com/401-and-ira
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.