The role of a 401(k) rollover in your plan

There are typically four options for plan participants leaving an employer, each offering advantages and disadvantages. Depending on your situation, you could opt for one or a combination of the following options:
  • Leave the money in your former employer’s plan, if permitted
  • Roll over the assets to your new employer’s plan, if one is available and rollovers are permitted
  • Roll over to an IRA
  • Cash out the account value
If you leave your 401(k) with your former employer, you’ll reduce the potential cost to reinvest into an IRA, but you’ll pay a fee for non-employees. If you choose to roll them into your new employer’s plan, you benefit from asset consolidation, though with less control over your assets and limited number of investment options. By rolling them into an IRA, you get a wide variety of investment options and may also take distributions based on customized tax withholding. If you choose to cash out, you may incur taxes and penalties.

Is a 401(k) rollover for you?

This is the way to go if you want more control in the management of your investments, more choices and the ability to continue to make contributions that align with your retirement goals. If assets are rolled into a rollover IRA, there is creditor protection in the state of Michigan for these assets. Every state can be different, so check with your particular state to see if they offer creditor protection. In addition, you can convert assets into a Roth IRA, using after-tax money to grow your investments.


If you cash out your 401(k) rather than roll it over, you will incur a 10% penalty if it’s a non-qualifying event or you’re under age 59½. Also, income tax is applicable to distribution.

Why United Wealth Management

Our financial advisors care about helping you reach your financial goals. We’ll go over the advantages of each rollover option to ensure you make an informed decision that serves your needs and risk tolerance. We’ll help you select from more than the limited number of investment options in the 401(k) plan, as well as follow federal rollover rules to avoid tax implications.

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