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Should I Roll Over My 401(k)?


Should I rollover my 401(k)?

Are you thinking of rolling over your employer-sponsored retirement plan to a Merrill IRA?

Each choice has different advantages and disadvantages in terms of investments, fees, withdrawal rules, required minimum distributions, taxes and protection from creditors. If you have multiple retirement plans, consider all your choices.Footnote 1
As you weigh the pros and cons of each approach, use the information below to help you understand the one that best aligns with your retirement goals. In addition, consider the potential benefits of having all your assets together at one firm as well as any practical reasons you may want to have multiple accounts instead of consolidating them.

Consider all the factors involved when deciding what to do with your 401(k)

Each choice may offer different investments and services, fees and expenses, withdrawal choices, required minimum distributions and tax treatment (particularly with reference to employer stock), plus they may provide different protection from creditors and legal judgments.

There are potential benefits and disadvantages for each choice, including those outlined on this educational overview. Keep in mind that in some situations, your choice is irreversible. The information provided here is educational in nature. We are not recommending a specific choice relating to your employer-sponsored plan assets.
Review the pros and cons of the choices for assets in your employer-sponsored plan (PDF)

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Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

When we make recommendations regarding securities or investment strategies (including as to rollovers and account types) with respect to retirement assets, we are a fiduciary within the meaning of Title I of the Employee Retirement Income Security Act (ERISA) and/or Section 4975 of the Internal Revenue Code, as applicable.

Footnote 1 Some rollover choices may not be available with respect to Roth employer plan assets.

Footnote 2 Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking RMDs to age 73. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024. If you reached age 73 in 2023, you are subject to the age 72 RMD rule in effect for 2022 to take your RMD by December 31st, 2023.

Footnote 3 If any portion of your employer plan account balance is eligible to be rolled over and you do not elect to make a direct rollover (a payment of the amount of your employer plan benefit directly to an IRA), the plan is required by law to withhold 20% of the taxable amount. This amount is sent to the Internal Revenue Service as federal income tax withholding. State tax withholding and a 10% early-withdrawal additional tax also may apply. If you timely complete an indirect rollover, you can work with your tax advisor to obtain a refund from the IRS when you file your tax return for the taxable year.

Footnote 4 Distribution subject to immediate 20% federal tax withholding, plus applicable state tax and possibly a 10% early-withdrawal additional tax if you are under age 59½ or under age 55 and separated from service. You may owe additional taxes when you file your income tax return with the IRS.

Footnote 5 If eligible.

Footnote 6 Contingent on specific plan rules.

Footnote 7 Distributions from a Roth IRA are not subject to federal income tax, provided you have satisfied a five-year holding period and at least one of the following applies: (i) you are 59½ or older; (ii) you are a qualified first-time home buyer (lifetime limit of $10,000); (iii) you are disabled; or (iv) the distribution is a payment after your death to your beneficiary or estate.

Footnote 8 Original Roth IRA account owners are exempt from taking Required Minimum Distributions (RMDs). Beneficiaries are required to take RMDs from inherited IRAs. A spouse beneficiary may elect to treat an inherited Roth IRA as his or her own and would not have an RMD requirement during his or her lifetime.

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Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF).

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp").
Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

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