Advice, Control Figure Prominently in Rollovers into IRAs

Defined contribution plan participants who are contemplating a rollover into an IRA are looking primarily for two things: advice and control, according to a recent study.

The results in LIMRA Secure Retirement Institute’s study “Money in Motion: Understanding the Dynamics of Rollovers, Roll-ins, and IRA Transfers” include findings that a strong majority — 80% — seek advice before they roll their DC plan assets into an IRA, and nearly 60% of them seek the help of a financial professional. In addition, one of the biggest factors participants considered regarding where to roll over their assets were recommendations by friends, family or co-workers.

In an interesting juxtaposition, while most of those who roll funds over seek others’ advice, LIMRA says that the top reasons for the rollovers involve the control an individual can exercise over their funds. They include:

• gaining more control;

• accessing better investment options to realize better returns; and

• consolidating the portfolio

In a press release, LIMRA Secure Retirement Institute Assistant Vice President Matthew Drinkwater, PhD said that people in their early 60s and with income between $100,000 and a quarter million dollars were the most likely to make such a rollover, and that approximately 11% of all workers between the ages of 40 and 75 made one in just the last two years.

The other major factors participants considered concerning where to direct their roll overs were the reputation of the company and an existing relationship with the company.

The IRS reminds, on a webpage it recently updated, that all or part of any eligible distribution from a retirement plan can be rolled over into an IRA, but that does not include:

• required minimum distributions;

• loans treated as a distribution;

• hardship distributions;

• distributions of excess contributions and related earnings;

• a distribution that is one of a series of substantially equal payments;

• withdrawals electing out of automatic contribution arrangements;

• distributions to pay for accident, health or life insurance;

• dividends on employer securities; or

• S corporation allocations treated as deemed distributions.

The IRS provides a chart of allowable rollovers here.