Evaluating your investments regularly is a key to financial security and wellness. Some questions to consider: Is there enough money in my emergency fund? Are my retirement accounts performing as expected? Have I updated the beneficiaries to my retirement accounts and life insurance policies?
It's a good idea to revist these questions often. Even better – engage strategists from TIAA and Fidelity Investments, U-M's approved partners for retirement planning, to help.
One of the most frequent questions to financial planners includes what to do with your IRA when you retire or change jobs.
You have a few broad options for your accounts when you retire or leave U-M. You can leave your money where it is, take a cash withdrawal or start a lifetime annuity with TIAA. If you plan to continue working elsewhere, you may decide to roll your funds over to another employer’s plan.
You may also receive offers or advice to choose another option: rolling over to an individual retirement account. Consider the costs and benefits carefully before pursuing an IRA rollover.
The Draw of an IRA: Flexibility and Hands-On Management
A rollover out of the U-M retirement plans allows you to move your TIAA or Fidelity contributions and earnings to another investment carrier through an IRA.
Individuals who choose an IRA rollover often want more flexibility or to play a more hands-on role in managing their money. An IRA rollover may accomplish these goals without incurring the tax liability of a cash withdrawal.
The Risks: Higher Fees, Fewer Protections
But it’s critical to understand the fees the IRA carrier charges and how they get paid. You may find significantly higher fees outside of an employer plan. And if your money manager earns a commission on any products you purchase, their goals may not be aligned with yours.
When you choose an IRA rollover, you’ll also give up certain benefits and protections that are unique to institutional plans. Unlike the U-M retirement plans, IRAs do not offer:
- Fee waivers for record-keeping and account maintenance
- Access to lower-cost share classes of investment funds
- Age 55 exception to the IRS 10% early withdrawal penalty
- Retirement account protection from bankruptcy and creditors
- Access to closed funds and unique institutional funds (for example, TIAA Traditional)
- Minimum distribution grandfathering on pre-1987 403(b) amounts
Talk to the Experts
There’s no rule that you have to take your money out of TIAA or Fidelity when you retire or end your U-M employment. If you’re not sure about the best option for your circumstances, a free consultation with TIAA or Fidelity may be able to help clarify the best course of action based on your goals, investment strategy and desired access to your funds.
If you ultimately decide to rollover your accounts, make sure you consult with a qualified tax adviser in advance.
- Review your retirement income options in more detail
- Download a guide to your retirement income options
- Learn more about rollovers and direct transfers
- Contact TIAA or Fidelity to set up a free consultation
- Choose carefully when selecting a financial planner
Update Your Beneficiaries
When evaluating your financial assets, make sure your beneficiary information is current for your retirement accounts and life insurance policies. It takes just a few minutes here – and can save considerable money, stress and family strife.