Question 1

Should I roll over my 401(k) into an IRA?

Accepted Answer

An IRA may offer broader investment choices and easier account consolidation, particularly if it’s a Self-Directed IRA, but your 401(k) may provide lower fees, stronger creditor protections, or favorable early-withdrawal rules. Compare costs, services, investment options, and tax consequences (including employer-stock treatment) before deciding.

Question 2

What should I do with my 401(k) when I retire?

Accepted Answer

You can usually leave it in the plan, roll it into an IRA, take withdrawals, or combine these. Leaving it in place keeps the plan's investments and protections. A rollover can widen your choices and simplify accounts. Taking it all as cash makes the whole balance taxable at once, which is rarely the best choice.

Question 3

What is the difference between a direct and an indirect rollover?

Accepted Answer

In a direct rollover, the plan sends the money straight to your IRA, with no tax withheld. In an indirect rollover, the plan pays you, withholds 20% for taxes, and you have 60 days to deposit the full amount, including the withheld part, or the shortfall becomes taxable. Direct rollovers avoid that risk.

Question 4

What is net unrealized appreciation?

Accepted Answer

Net unrealized appreciation (NUA) is the increase in the value of your employer's stock while it is held in your 401(k). If you meet the requirements, you can transfer the shares directly to a taxable brokerage account rather than roll them into an IRA. You pay ordinary income tax on the plan's original cost for the shares upon transfer. The NUA is taxed as long-term capital gain when you sell, regardless of how long you hold the shares. Any additional growth follows the usual capital gains rules. Rolling the shares into an IRA gives up this special tax treatment.

	Keep the 401(k)	Roll over to an IRA
Investment choices	Limited to the plan's menu	Much broader, including self-directed options
Fees	Can be low in large plans	Depends on the investments chosen
Creditor protection	Strong under federal law	Varies by state
Penalty-free withdrawals at 55	Possible if you left the job that year or later	Generally not before 59 and a half

Should I roll over my 401(k) into an IRA?