Should I Roll Over My 401(k)?

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Should I rollover my 401(k)?

Are you thinking of rolling over your employer-sponsored retirement plan to a Merrill IRA?

Each choice has different advantages and disadvantages in terms of investments, fees, withdrawal rules, required minimum distributions, taxes and protection from creditors. If you have multiple retirement plans, consider all your choices.Footnote ¹

As you weigh the pros and cons of each approach, use the information below to help you understand the one that best aligns with your retirement goals. In addition, consider the potential benefits of having all your assets together at one firm as well as any practical reasons you may want to have multiple accounts instead of consolidating them.

Learn more about Merrill IRAs

Consider all the factors involved when deciding what to do with your 401(k)

Each choice may offer different investments and services, fees and expenses, withdrawal choices, required minimum distributions and tax treatment (particularly with reference to employer stock), plus they may provide different protection from creditors and legal judgments.

Expand all

Leave the assets in your former employer's plan

Pros

Access to familiar investment choices
Likely lower costs
Broad protection from creditor claims under federal law
Preserve tax-deferred growth potential
If between 55 and 59½, may be able to take early withdrawals free of the 10% additional tax

Cons

Investment choices may be limited
Plan rules on distributions and beneficiary distribution choices may be restrictive
Can't make new contributions or take loans
The Required Minimum Distribution (RMD) rule applies if assets are left in a former employer's planFootnote ²

Withdraw the assets in a lump-sum distributionFootnote ³

Pros

Immediate access to the assets
Choose how you spend or reinvest the assets

Cons

Taxes will reduce the amount you receiveFootnote ⁴
Cannot put assets back into former employer's plan
Less opportunity for potential tax-deferred future growth

Roll over all or a portion of the assets to a traditional IRA

Pros

Potential for future tax-deferred growth
Can make new contributions to rollover IRAFootnote ⁵
Typically more investment choices and planning tools
Access to investment advice

Cons

Limited opportunity for early withdrawals without paying a 10% early-withdrawal additional tax (early tax is not due for amounts rolled over)
Loans are not available
Protection from creditors in bankruptcy only
Additional fees should be considered when moving assets to an IRA (for example, transfer fees may apply)

Move the assets to your new employer's retirement plan

Pros

Access to potentially new investment choices
Avoid immediate taxes and a potential 10% early-withdrawal additional tax
Broad protection from creditor claims under federal law
Preserve tax-deferred growth potential
May not have to take required minimum distributions (RMDs) if you are still workingFootnote ²
May be able to take a loanFootnote ⁶

Cons

Some plans don't allow rolloversFootnote ⁶
There may be waiting periods or other restrictionsFootnote ⁶
Investment choices may be limited

Convert all or a portion of the assets to a Roth IRA

Pros

Withdrawals of contributions are federal income tax-free (taxes are paid at time of contribution)
Qualified withdrawals of any earningsFootnote ⁷
Able to pass potential earnings to heirs federal income tax-freeFootnote ⁸
Original account owner doesn't have to take RMDsFootnote ⁸
Potential hedge against rising taxes

Cons

Income taxes paid when you convert the assets
Loans are not available
Limited opportunity for early withdrawals
Protection from creditors in bankruptcy only
Additional fees should be considered when moving assets to an IRA (for example, transfer fees may apply)

There are potential benefits and disadvantages for each choice, including those outlined on this educational overview. Keep in mind that in some situations, your choice is irreversible. The information provided here is educational in nature. We are not recommending a specific choice relating to your employer-sponsored plan assets.

Review the pros and cons of the choices for assets in your employer-sponsored plan (PDF)

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Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

When we make recommendations regarding securities or investment strategies (including as to rollovers and account types) with respect to retirement assets, we are a fiduciary within the meaning of Title I of the Employee Retirement Income Security Act (ERISA) and/or Section 4975 of the Internal Revenue Code, as applicable.

Footnote ¹ Some rollover choices may not be available with respect to Roth employer plan assets.

Footnote ² Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking RMDs to age 73. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024. If you reached age 73 in 2023, you are subject to the age 72 RMD rule in effect for 2022 to take your RMD by December 31st, 2023.

Footnote ³ If any portion of your employer plan account balance is eligible to be rolled over and you do not elect to make a direct rollover (a payment of the amount of your employer plan benefit directly to an IRA), the plan is required by law to withhold 20% of the taxable amount. This amount is sent to the Internal Revenue Service as federal income tax withholding. State tax withholding and a 10% early-withdrawal additional tax also may apply. If you timely complete an indirect rollover, you can work with your tax advisor to obtain a refund from the IRS when you file your tax return for the taxable year.

Footnote ⁴ Distribution subject to immediate 20% federal tax withholding, plus applicable state tax and possibly a 10% early-withdrawal additional tax if you are under age 59½ or under age 55 and separated from service. You may owe additional taxes when you file your income tax return with the IRS.

Footnote ⁵ If eligible.

Footnote ⁶ Contingent on specific plan rules.

Footnote ⁷ Distributions from a Roth IRA are not subject to federal income tax, provided you have satisfied a five-year holding period and at least one of the following applies: (i) you are 59½ or older; (ii) you are a qualified first-time home buyer (lifetime limit of $10,000); (iii) you are disabled; or (iv) the distribution is a payment after your death to your beneficiary or estate.

Footnote ⁸ Original Roth IRA account owners are exempt from taking Required Minimum Distributions (RMDs). Beneficiaries are required to take RMDs from inherited IRAs. A spouse beneficiary may elect to treat an inherited Roth IRA as his or her own and would not have an RMD requirement during his or her lifetime.

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Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:

Are Not FDIC Insured	Are Not Bank Guaranteed	May Lose Value
Are Not Deposits	Are Not Insured by Any Federal Government Agency	Are Not a Condition to Any Banking Service or Activity

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF).

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp").

Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.

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Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

Are Not Deposits

Are Not Insured by Any Federal Government Agency

Are Not a Condition to Any Banking Service or Activity

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

The performance data contained herein represents past performance which does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance information current to the most recent month end, please contact us.

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Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. 10 year returns are provided for funds with greater than 10 years of history.

Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks. This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money. Prospectuses can be obtained by contacting us.

Expense Ratio – Gross Expense Ratio is the total annual operating expense (before waivers or reimbursements) from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

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Should I Roll Over My 401(k)?

Should I rollover my 401(k)?

Are you thinking of rolling over your employer-sponsored retirement plan to a Merrill IRA?

Consider all the factors involved when deciding what to do with your 401(k)

Leave the assets in your former employer's plan

Withdraw the assets in a lump-sum distributionFootnote 3

Roll over all or a portion of the assets to a traditional IRA

Move the assets to your new employer's retirement plan

Convert all or a portion of the assets to a Roth IRA

Ready to get started?

Call us

Set up a meeting

I'd Like to

Discover Merrill

Contact Us

Unlimited $0 Trades

Withdraw the assets in a lump-sum distributionFootnote ³