Key Advantages and What to Know Before Moving Your Retirement Savings
If you’ve recently changed jobs or are approaching retirement, you may be wondering what to do with your old 401(k) plan. One of the most common options is a 401(k) rollover, which allows you to move your retirement savings into an Individual Retirement Account (IRA).
For many people in Buffalo and Western New York, a rollover can provide more flexibility, better investment options, and improved long-term planning opportunities.
What Is a 401(k) Rollover?
A 401(k) rollover is the process of transferring money from a former employer’s retirement plan into another qualified account, usually:
A Traditional IRA
A new employer’s 401(k)
A Roth IRA (taxable conversion)
This typically happens when you:
Change jobs
Retire
Want more control over your investments
An IRA is not an investment itself. It’s an account that can hold:
Stocks
Bonds
Mutual funds
ETFs
Annuities
Money market funds
Your Main Options When Leaving a Job
When you leave an employer, you usually have four choices:
Leave the money in the old 401(k) (if allowed)
Roll it into a new employer’s 401(k)
Roll it into an IRA
Cash it out (may trigger taxes and penalties)
For most people, cashing out is the least favorable option because it can create:
Immediate income taxes
Possible early withdrawal penalties
Advantages of a 401(k) Rollover
📊 Key Benefits of a Rollover
401(k) Rollover Advantages
- ✔ Avoid immediate taxes when done correctly
- ✔ Maintain tax-deferred growth
- ✔ Access a wider range of investments
- ✔ Potentially lower fees
- ✔ Simplify multiple retirement accounts
Main benefits include:
Continued tax-deferred growth
More investment choices than many employer plans
Potentially lower fund expenses
Easier account consolidation
Greater control over retirement strategy
The Most Important Rule: Direct Rollover
To avoid taxes and penalties, most rollovers should be done as a:
Trustee-to-Trustee (Direct) Rollover
This means:
Funds move directly from the 401(k) to the new IRA
No taxes are withheld
No penalties apply
What to avoid
If the check is made payable to you:
The plan must withhold 20% for federal taxes
You have 60 days to redeposit the full amount
Missing the deadline can trigger taxes and penalties
When a Rollover May Make Sense
A rollover is often considered when:
You want more investment options
Your old plan has high fees
You want to consolidate multiple accounts
You are retiring and planning income strategies
When keeping the 401(k) Might Be Better
In some cases, staying in the employer plan may make sense, such as:
Very low-cost institutional funds
Special creditor protections
Ability to take plan loans
Unique plan features
There is no one-size-fits-all answer. The best decision depends on:
Investment costs
Available options
Tax implications
Retirement goals
Using a Rollover for Retirement Income Planning
Some retirees choose to roll their 401(k) into an IRA to:
Create a structured withdrawal plan
Rebalance investments
Convert portions to a Roth IRA
Consider annuity options for income
Possible annuity strategies include:
Fixed annuities
Indexed annuities
Immediate income annuities
Each option has different features, risks, and tax considerations.
To Rollover or Not? It Depends on Your Situation
The decision to roll over a 401(k) involves several factors:
Investment fees
Available fund options
Tax consequences
Retirement timeline
Income needs
Understanding these factors is essential before making any move.
The Bottom Line
A 401(k) rollover in Buffalo, NY can offer more flexibility, broader investment choices, and better control over your retirement strategy. However, the right decision depends on your individual goals, tax situation, and long-term plan.
Working with a financial advisor can help you evaluate your options and avoid costly mistakes.