It happens to the best of us: you opt into your employer’s retirement plan and then “set it and forget it,” or you open several different Individual Retirement Accounts (IRAs). You go about your daily life, all the while, savings are automatically added to your employer-sponsored retirement plan, and you make contributions to your IRAs. But what happens to those retirement assets when life changes (retirement, job change)?

It might be time to consider moving those assets from your current retirement plans into an IRA with Thrivent Mutual Funds. You certainly should understand all your options, weigh the pros and cons, and make a choice which is right for your goals and circumstances.

When can I move assets?

While you can move your IRAs anytime you choose, if you experience any of the following life events, a rollover from an employer-sponsored retirement plan, such as a 401(k), may be an option for you depending on the actions allowed under the plan document:

• Job change
• Retirement
• Reaching age 59½ 
• Disability
• Plan termination
• Divorce  

Options for moving assets from your 401(k) or similar employer-sponsored plan

• Direct rollover
  Your employer will have your retirement assets sent directly to an IRA or new employer plan. You don’t take receipt of the funds, so no federal tax withholding is required.

• Indirect rollover
  You take receipt of the funds and have 60 days to deposit them in an IRA or other employer-sponsored retirement plan to avoid paying taxes and possible penalties on the distribution. Distributions from employer retirement plans are subject to a mandatory 20% tax withholding. As taxes are withheld, you have to use other funds to rollover the full amount of the distribution. This is important as any portion not rolled over, including amounts withheld, will be considered a distribution and subject to income tax and generally a 10% penalty if under age 59 ½ unless an exception applies. Learn more about direct and indirect rollover IRAs.

Options for moving assets from one IRA account to another

• IRA to IRA transfer
  Transfer assets from one IRA account to another (known as a trustee-to-trustee transfer, such as from your current institution to a Thrivent Mutual Funds account) for the same type of account (e.g., IRA to IRA). Note: you can only make ONE indirect rollover of assets from an IRA once in any 12-month period, no matter how many IRAs you have.

• Learn more about IRA to IRA transfers. 

• Roth IRA conversion
  Convert one type of retirement account to another (like a traditional IRA or Employer Retirement Plan to a Roth IRA). Part or all of the distribution may be subject to income tax. Learn more about Roth IRA conversions. 

Consolidating assets

It’s important to consider your needs and circumstances when looking to move your retirement assets. Some factors to keep in mind include:

• Investment flexibility & fees
  Compare the options you currently have with the options available with Thrivent Mutual Funds. Look at the investment fees and other expenses, as well as the variety of options available. 

• Services offered
  Plans and providers potentially offer a variety of account services you may want. Compare current services and conveniences to those available with Thrivent Mutual Funds. With consolidation and having all your retirement assets in one place, it may be easier to manage your accounts and monitor your progress.

• Distribution flexibility
  Both IRAs and employer-sponsored plans may offer options you want or need. Compare access to early withdrawals, loans, employer stock considerations, and required minimum distributions, as well as the frequency distributions are available. Some plans may restrict the frequency of withdrawals.

IRA distributions that are used for certain non-retirement purposes, such as a first-time home purchase¹ or qualified education expenses, are exempt from the 10% federal penalty tax that typically applies to distributions taken prior to age 59½. And as long as you still have earned income, you can continue to make contributions to the IRA.

• Creditor protections
  Generally, employer-sponsored plans have unlimited protection from creditors under federal law. IRA assets are less protected and laws vary by state.

What can I rollover?

You can rollover or transfer assets from almost any kind of retirement plan, the most common include²:

• Traditional IRAs
• Roth IRAs
• 401(k)s
• 403(b)s
• Roth 401(k)s
• Roth 403(b)s
• SIMPLE IRAs
• SEP IRAs

Moving from my employer 401(k) or similar plan

You’ve worked so hard for your retirement assets, so before you move them, it’s important to do your homework and to make a decision which is right for you. Here’s a quick comparison of other available options:

Pros and cons of options

Cash distribution

Pros

• Immediate use of your money
• If employment is terminated in the year of age 55 or over, 10% penalty does not apply on distributions from employer qualified plans.

Cons

• If you take a lump-sum cash payout from a qualified employer plan, your plan provider is required to withhold 20% for taxes. 
• If you’re under age 59½, a 10% early withdrawal penalty will apply (if you don't qualify for the age 55 exception or any other exceptions).
• Withdrawals are taxed as ordinary income.

Leave assets where they are

Pros

• Maintain tax-deferred status
• Access options exclusive to your plan
• No administrative effort
• May have ability to take a loan from plan balance
• Protection from creditors
• May have access to low cost institutional investment options
• Penalty-free withdrawals from employer-qualified plan if you terminate service in the year of age 55 or over

Cons

• May have limited investment options
• May have restricted withdrawal provisions
• May have minimum balance requirements

Move to my new employer-sponsored plan

Pros

• Maintain tax-deferred status
• Access options exclusive to your plan
• May reduce ongoing administrative effort
• May have ability to take a loan from plan balance
• Protection from creditors
• May have access to low-cost institutional investment options
• Would likely reduce fees and expenses with one account rather than two

Cons

• May have limited investment options
• May have restricted withdrawal provisions
• May have minimum balance requirements

Rollover to an IRA with Thrivent Mutual Funds

Pros

• Maintain tax-deferred status
• May have a broader range of investment options
• Allows for consolidation and simplified account management, recordkeeping, and tax reporting – helping provide a clearer overall picture of your retirement assets
• Access to professional guidance if you work with a Thrivent financial representative 

Cons

• No possibility for loans
• Assets may not be protected from creditors
• May experience negative tax consequences if rolling over significantly appreciated employer stock³

What is the process?

If you’ve decided to initiate a rollover or transfer of your retirement assets, there are several steps you need to take, regardless of the financial institutions involved. At a high-level, these are the steps:

1. Identify and set up a destination for your money. You can move the assets into an existing account or set up a new account. Once the account is approved and set up, the rollover/transfer can start.
2. Initiate the request. The company you’ve opened your new account with will ask you to complete a form in order to move the money from the current institution to your new account. This will most likely include some sort of proof of ownership and an explanation of how the funds should be distributed in the new account. The current company may also have additional forms to be completed.
3. Money transferred. Depending on the types of accounts and processes of the financial institutions involved, the funds may be transferred with or without your involvement. You may receive a check to be deposited with your new account’s company. This process may take several days or weeks.
4. Process completed. Depending on the types of accounts and processes of the financial institution involved, you’ll be informed when the funds are deposited in your new account or notified on your next statement.

Note: These steps (and even their order) may vary according to the type of rollover/transfer at different financial institutions. 

Get moving

After carefully reviewing your options and taking into account your needs and circumstances, if you choose to move your retirement assets into an IRA with Thrivent Mutual Funds, you’ll have access to a variety of mutual fund offerings to help you save for retirement. You can build your own portfolio based on your risk tolerance and time horizon or contact an experienced Thrivent financial advisor for help when you need it.