Leave the Assets where they are

Leave the Assets where they are

This brings us to Option #2: Leaving your assets where they are.

This is not necessarily a bad idea.

At least the assets accumulate on a tax-deferred basis. This is what Michelle and David have been doing.

However, you should be aware of several issues:

    * First, depending on the amount you have in your plan, your previous employer may not allow you to keep your money there.

    At their discretion, employers can force a lump-sum distribution for balances of less than $5,000 and ignore amounts attributable to previous rollovers from other plans (and earnings thereon) in their calculation of the balance.

    Employers can also force a lump-sum distribution for employees who have reached the plan’s normal retirement age.

    * Second, you should take a close look at the investment choices offered by your previous plan.

    Are these choices limited to a fixed account or the stock of your employer?

    Do you have professionally managed portfolios of stocks, bonds, and money market instruments in which you can participate?

    If so, how have they performed over time?

    * Another issue to consider is convenience. It may not be convenient for you or your heirs to receive multiple statements from many sources and have to contact various sources when you want to change investment options or make withdrawals.

    * There are estate planning issues to consider as well. The ability to name a beneficiary may be limited by the terms of a qualified retirement plan and generally can’t be changed after your death.

    Under recent IRS regulations, IRAs generally offer greater flexibility in naming a beneficiary and allow opportunities for post-death planning.