March 29, 2023

Company Plans or IRA Brokerage Accounts?

1.Investment Options

Within an IRA, you have a universe of investment options to choose from. In a company plan, you have a limited number of investments typically offered by the company plan. Also, you can customize investment choices to meet your personal needs. That’s important in volatile times!

2. Consolidation and Control

Chances are, you have worked at more than one employer. It’s hard to keep track of all the different 401(k)’s you may have because they are in different places. Performing a roll over into an IRA account can help you consolidate your hard earned money into one place!

3. Roth Conversion Ability

IRA Funds can be converted to Roth IRA funds at any time. To convert from a company plan, the funds would have to be eligible for a distribution.

4. RMD Simplicity

IRAs are aggregated for calculating RMDs. An IRA owner can take his RMD from any one or a combination of his own IRAs. With company plans, the employee generally has to take his RMD from each plan separately. Exception: 403(b) plans – RMDs can be taken from any one of a person’s 403(b) plans.

5. QCD - Qualified Charitable Distributions

QCDs can only be performed from an IRA, not from company plans. Plan funds would first have to travel to an IRA to take advantage of the QCD.

6. IRAs Have no Withdrawal Restrictions

Company plans may have restrictions on withdrawals. In an IRA, you generally have immediate access to funds, regardless of age. Even if you are under the age of 59 1/2 , you have withdrawn from your IRA with a 10% tax on the amount. Company plans will have restrictions before and after the age of 59 ½.

7. More Flexible Withholding Options

Plans are generally required to withhold 20% of an eligible rollover distribution paid to an employee. With IRAs, there is no such 20% mandatory withholding rule. IRA owners can opt out of withholding, elect to have 10% withheld, or even a larger amount withheld.

8. Secure Act may require plan changes

New tax rules mean a learning curve that may be longer for plan administrators than for your own financial advisor, who may be able to react and update financial plans more efficiently.

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