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Retirement

Making Sense of Rollovers and Transfers

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 Individual Retirement Accounts (IRAs) at various companies. You go about your daily life, all the while, savings are automatically added to your employer 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 plan 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?

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 may be an alternative for you depending on the options allowed under the plan document:

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

What Are The Different Options for Moving Assets?

  • Direct Rollover IRA
    Your employer will have your retirement assets sent directly into an IRA or new employer plan. You don’t take receipt of the funds, so no federal tax withholding is required. Learn more about direct rollover IRAs.
  • Indirect Rollover
    You take receipt of the funds and have 60 days to deposit them in an IRA or other employer retirement plan to avoid paying taxes and penalties on the distribution. Distributions from employer retirement plans are subject to a mandatory 20% tax withholding, or 10% for assets coming from an IRA (which may be waived). As taxes are withheld you have to use other funds to roll over 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.

Note: beginning January 1, 2015, 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.

  • IRA to IRA Transfer
    Transfer assets from one institution 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). 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). Learn more about Roth IRA conversions

Things to Consider When 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, required minimum distributions and 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.2

  • 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 Roll Over?

You can roll over or transfer assets from almost any kind of retirement plan, the most common include3:

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

What Are Other Options for Moving from My Employer-Sponsored Retirement 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

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 no exception applies)
  • 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
  • Generally can make penalty free withdrawals beginning at age 55
  • May have access to low cost institutional investment options

Cons

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

Move to a new employer-sponsored plan

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
  • Generally can make penalty free withdrawals beginning at age 55
  • May have access to low cost institutional investment options

Cons

  • May have limited investment options
  • May have restricted withdrawal provisions
  • May have minimum balance requirements
  • May have higher fees and expenses

Roll over to an IRA with Thrivent Mutual Funds

Pros

  • The power of tax-deferred compounding will continue
  • May have a broader range of investment options
  • Allows for consolidation and simplified account management, record keeping, 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
  • If you’re under age 59½, a 10% early withdrawal penalty will apply (if no exception applies)
  • Assets may not be protected from creditors
  • May experience negative tax consequences if rolling over significantly appreciated employer stock4

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—You’ll be informed when the funds are deposited in your new account. 

Note: These steps (and even their order) may vary according to the type of rollover/transferred 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 Representative for help when you need it.5

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Ready to Invest?

1No penalty on up to $10,000 of distribution you receive to buy or build a first home. You qualify for a first-time home purchase if you or your spouse has not owned a home in the previous two years.

2You must be under age 70½ to contribute to a Traditional IRA. This age restriction does not apply to Roth IRAs. 

3Roth IRAs, Roth 401(k)s and Roth 403(b)s can only be rolled or transferred into a Roth IRA. During the first two years of participation, a SIMPLE IRA can only be rolled or transferred into another SIMPLE IRA.

4Please discuss your options for appreciated employer stock with your tax advisor.

5Additional fees may apply when working with a Thrivent Financial Representative. See Thrivent.com/disclosures for more information.