American Funds: Stay in your old plan vs. Roll into an IRA

Roll to an IRA	Stay in your old plan
Benefits Your money can continue to grow tax–deferred. You expand your investment choices beyond your plan’s options. You control your money — no plan rules or restrictions. You can consolidate multiple retirement accounts. Generally, you can make your own contributions to your rollover IRA.	Benefits Your money can continue to grow tax–deferred. You can keep your assets in the same investments.
Keep in mind Roth 401(k) or 403(b) accounts will be rolled into a Roth IRA. Non-Roth accounts can be rolled into a traditional or Roth IRA. You’ll be responsible for any unpaid taxes on the taxable portion of a Roth IRA rollover. If you’re rolling to a Roth IRA in 2010, you have the option of deferring income taxes by reporting half of the taxable income for 2011 and the other half for 2012. You can avoid required minimum distributions over your lifetime with a Roth IRA. With retirement plan accounts and traditional IRAs, you’re generally required to withdraw a certain amount every year once you reach age 70-1/2. If you’re rolling to a traditional IRA, make sure the rollover funds go directly from your old plan’s trustee to the rollover IRA’s trustee or custodian to avoid having income tax withheld on the taxable portion of your distribution.	Keep in mind Your investment options are limited to what is offered in the plan. You’re still subject to the rules and restrictions of the plan. If your account balance is $1,000 or less, your plan might cash you out. If your balance is between $1,000 and $5,000, your plan might roll your balance into an IRA selected by your former employer.

Roll to an IRA

Stay in your old plan

Benefits

Your money can continue to grow tax–deferred.

You expand your investment choices beyond your plan’s options.

You control your money — no plan rules or restrictions.

You can consolidate multiple retirement accounts.

Generally, you can make your own contributions to your rollover IRA.

Benefits

Your money can continue to grow tax–deferred.

You can keep your assets in the same investments.

Keep in mind

Roth 401(k) or 403(b) accounts will be rolled into a Roth IRA. Non-Roth accounts can be rolled into a traditional or Roth IRA. You’ll be responsible for any unpaid taxes on the taxable portion of a Roth IRA rollover.

If you’re rolling to a Roth IRA in 2010, you have the option of deferring income taxes by reporting half of the taxable income for 2011 and the other half for 2012.

You can avoid required minimum distributions over your lifetime with a Roth IRA. With retirement plan accounts and traditional IRAs, you’re generally required to withdraw a certain amount every year once you reach age 70-1/2.

If you’re rolling to a traditional IRA, make sure the rollover funds go directly from your old plan’s trustee to the rollover IRA’s trustee or custodian to avoid having income tax withheld on the taxable portion of your distribution.

Keep in mind

Your investment options are limited to what is offered in the plan.

You’re still subject to the rules and restrictions of the plan.

If your account balance is $1,000 or less, your plan might cash you out. If your balance is between $1,000 and $5,000, your plan might roll your balance into an IRA selected by your former employer.