Convincing a client to roll qualified plan money to an IRA
Help! I have an unmarried client who has money in a former employer’s qualified plan. Her nieces and nephews are the beneficiaries. In light of the recent news that non-spouse rollovers will be mandatory for qualified plan distributions beginning in 2008, what other reasons and incentives can I give to my client to have her roll these funds into an IRA? She has been reluctant to do so; and in light of the update on non-spouse rollovers, she has become even more hesitant.
Thank you!
Dave
Permalink Submitted by Alan Spross on Thu, 2007-11-08 03:01
Without mentioning some of the advantages of leaving the funds in the 401k, here are some advantages of an IRA transfer:
1) More investment options and custodian platform choices. If a planner is retained, ease of asset management.
2) If a 72t is needed to eliminate the penalty prior to age 59.5, an IRA should be used.
3) Transfer by employee eliminates that task for the beneficiaries.
4) More RMD complexity at age 70.5 when there are both employer plans and IRA accounts.
5) Ability to make a qualified charitable distribution if this is extended.
6) More flexibility in customizing beneficiary designations with some IRA custodians.
7) Expenses of some employer plans are difficult to determine.
One of the advantages of leaving the assets in the plan are the chance for any employer stock shares to gain more NUA potential, so this should be investigated before taking any action.