Pros and Cons of Leaving Your Assets in Your Company's Plan

You can keep your retirement plan balance growing tax-deferred by leaving your assets in your company's retirement plan—if the plan allows you this option (your plan administrator can tell you whether it does).

Leaving your money in the company plan offers the same primary advantage as rolling it over into an IRA—continued tax deferral on investment earnings. As with an IRA, no income taxes or penalties are due until you take distributions from the plan. Your plan may provide other advantages. Also, you may have the option of borrowing from your plan, a feature that is not part of IRAs.

Another option may be to roll over your plan savings to a new employer's plan which can keep your savings growing on a tax-deferred basis. Sometimes, you can move the money as soon as you begin working at the new job. In other cases, you must wait until you are eligible to join the new plan before you can move in the assets from your old plan. Talk with your new employer about the options open to you.

If you're not sure about the options at your new job, or if the new employer's plan doesn't allow for an immediate rollover of assets from your old employer's plan, you can do a direct rollover of the old plan assets into a "conduit" IRA. With a conduit IRA, you keep the retirement-plan assets separate from other IRA assets you may have. Then, if you are able to do so, move the assets from the conduit IRA into the plan at your new employer.

Advantages and Disadvantages

Among the advantages of leaving your assets in the company plan:

• It is the simplest option to keep money growing tax-deferred.
• You may choose from familiar investment choices.
• You know how the plan works.

Among the disadvantages of leaving your assets in the company plan:

• To withdraw money, you will need to work with your prior employer, which may be inconvenient.
• You will be limited to the investment choices within the retirement plan.
• You may lose your loan option.