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Should I leave my money in a SARSEP or roll it over into my new company's 401k?

I don't know whether I'm better off leaving it in the SARSEP or rolling it over into my new company's 401k or into an IRA? Will there be fees or penalties for doing this?

Jul 09, 2015 by Donna in  |  Flag
3 Answers  |  5 Followers
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12 votes

If you are no longer employed by the employer offering the SARSEP, you're probably going to be better off rolling it over to your new employer's 401(k) plan or an IRA. This is generally true for consolidation purposes. In addition, depending on your age and retirement timeline, the minimum age you can withdraw from a SARSEP without penalties is 59 1/2 whereas it is age 55 from a 401(k) plan. And finally, a 401(k) usually has loan provisions (check with your current employer) which a SARSEP does not. Make sure you have adequate investment options in your 401(k) plan that meet your objectives. If not, it may behoove you to look into an IRA for diversification purposes.

1 Comment   |  Flag   |  Jul 09, 2015
Eric Simonds CFP®

I always caution clients about rolling any money into their current 401k because of the limited choices and the excessive expenses associated with SOME employer's plans.

Flag |  Jul 13, 2015 near Brunswick, ME

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6 votes
Frank Reilly Level 20

You have two choices with the SAR-SEP. One, you can roll it into an IRA. As long as you plan to retire prior after 60, an IRA should be preferred because there are more investment option and likely less fee’s. However, it important to remember you are only permitted one rollover in any 12-month period. Your second option is to roll it into a current 401(k) plan. If you plan to retire between 55-60, this may be preferred because there are no penalties for distributions during that time as long as you are retired.

Here at RFA, we are offering a free 401(k) tuneup to anyone with questions. Just give us a call at (800) 682-3237 or email: info@rfawealth.com and we can take a look at your current 401(k) plan plus give you an analysis - all at no cost.

Comment   |  Flag   |  Jul 10, 2015 from La Mesa, CA

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Steve Casull Level 13

Roll the SARSEP to your own IRA (Individual Retirement Account). The biggest reason NOT to roll it to your new employers plan is you will be limited as to the investment choices offered. There may also be restrictions on withdrawals in the employer plan in case of an emergency.
Some new employees may believe that the new employer will feel the employee is more loyal if that employee rolls their previous 401K into the new company plan. This isn't a valid concern.

2 Comments   |  Flag   |  Jul 09, 2015 from South Jordan, UT
Steve Casull

I would also like to add and this is a generalization, as I know nothing about your situation, if the market is down greatly, and you are in a low tax bracket, you may want to consider rolling the SEP into a ROTH IRA. Now you need to realize you will need to pay the taxes on the amount rolled, but from now until you retire, or start withdrawing the money anything the account grows to will be withdrawn tax free in your retirement.

Flag |  Jul 09, 2015 near South Jordan, UT
Steve Casull

Donna, seek out a good Financial Advisor. Like all service providers, there are good ones and bad ones.

Flag |  Jul 09, 2015 near South Jordan, UT

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