Should You Rollover Your Pension Or 401(k) To An IRA?

Should You Rollover Your Pension Or 401(k) To An IRA?

I’m frequently asked by people facing layoffs or early retirement whether or not it’s better to keep your pension and 401(k) or roll them over to a traditional IRA (assuming the pension allows lump-sum rollovers).  Here is a table comparing these choices.

Given all these differences, what’s the right choice?  It depends. If you are a reasonably sophisticated investor or are working with a financial planner, the IRA gives you the greatest flexibility to tailor your portfolio to meet your unique financial goals.  In that case a rollover might make the most sense.  On the other hand, if you are not a sophisticated investor and/or do not want to pay an advisor to help with your portfolio, the 401(k) and pension might be easier for you to manage yourself.  In either case, the decision whether or not to rollover a 401(k) or pension to an IRA is an important one.   Be sure to spend the right amount of time and effort making this decision.

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