If you’re like many Boeing employees, you have a voluntary investment plan you’ve been contributing to for years. But what do you do when you leave your job – do you take the money and run, roll it over into an IRA, or leave it where it is?
Taking the money and running may seem like the easy option, but it’s not always the best choice. For one thing, you’ll have to pay taxes on the withdrawal, which can eat into your savings. And if you’re under 59 1/2, you may also have to pay a 10% early withdrawal penalty. So, unless you really need the money, it’s usually best to either roll over your voluntary investment plan into an IRA or leave it where it is.
So, if you are considering rolling your voluntary investment plan into an IRA, this blog post will help explain the pros and cons of each option.
Rolling your Voluntary Investment Plan into an IRA – Pros
Non-Taxable Event:
When done correctly, you can roll your voluntary investment plan into an IRA without a 10% premature distribution penalty and maintain your tax-deferred status (assuming you’re under age 73).
More Investment Options:
Rolling over into an IRA gives you more control over your investment options. Unlike being limited to just a few mutual funds with your voluntary investment plan, IRAs provide thousands of choices, including ETFs, individual stocks, bonds, mutual funds, and annuity contracts when appropriate.
Roth IRA Conversion Option:
While it is possible to convert your voluntary investment plan into a voluntary investment plan Roth if you opt to roll your money into a Roth IRA outside of your voluntary investment plan, there is no required minimum distribution age like there is with a voluntary investment plan Roth at age 73. Account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, and withdrawal limitations from a Roth IRA. In addition, if you are requested to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
Rolling your voluntary investment plan into an IRA – Cons
Higher fees:
There are fees associated with hiring a financial advisor. You could choose to manage on your own or at a discount brokerage firm or seek the advice of a financial advisor. Financial advisor fees usually range from 1 to 2 percent of the assets under management. Many people find value in the relationship is worth the added fees.
Early Withdrawal Penalties:
If you withdraw before 59 ½ from an IRA, there will be a 10% penalty. So, if you are not sure you will need the money, a rollover might not be a good idea. When separating service between 55 & 59, ½ distributions from your voluntary investment plan would not be subject to the 10% penalty.
Conclusion:
So, there you have it – the pros and cons of rolling over your voluntary investment plan into an IRA. As you can see, rolling over has some advantages and disadvantages, so it is essential to research and ensure you understand the process before deciding.
Are you thinking of rolling over your Boeing voluntary investment plan? We’re happy to help you determine whether a rollover makes sense for your specific situation. Our extensive knowledge of the Boeing benefit plans can help you. Give us a call today.