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Make the most of your retirement assets

If you have multiple retirement plans, consider all your choices. Each has different advantages and disadvantages in terms of investments, fees, withdrawal rules, required minimum distributions, taxes and protection from creditors.

In addition, consider the potential benefits of having all your assets together at one firm. Having a single view of your investments can give you greater control over your financial life and provides your advisor with greater insight into your retirement assets. This helps your advisor take a more informed approach when recommending a strategy to you.

As you weigh the pros and cons of each approach, your Merrill Lynch financial advisor can help you understand the one that best aligns with your retirement goals.

1 Understand your choices1

Leave the assets in your former employer’s plan.


Pros

  • Access to familiar investment choices
  • Likely lower costs
  • Broad protection from creditor claims under federal law
  • Preserve tax-deferred growth potential

Cons

  • Investment choices may be limited
  • Plan rules on distributions and beneficiary distribution options may be restrictive
  • Can’t make new contributions or take loans

    Pros

  • Access to familiar investment choices
  • Likely lower costs
  • Broad protection from creditor claims under federal law
  • Preserve tax-deferred growth potential

    Cons

  • Investment choices may be limited
  • Plan rules on distributions and beneficiary distribution options may be restrictive
  • Can’t make new contributions or take loans

Withdraw the assets in a lump-sum distribution.2


Pros

  • Immediate access to the assets
  • Choose how you spend or reinvest the assets

Cons

  • Taxes will reduce the amount you receive
  • Cannot put assets back into former employer’s plan
  • Less opportunity for potential tax-deferred future growth

    Pros

  • Immediate access to the assets
  • Choose how you spend or reinvest the assets

    Cons

  • Taxes will reduce the amount you receive
  • Cannot put assets back into former employer’s plan
  • Less opportunity for potential tax-deferred future growth

Roll over all or a portion of the assets to a traditional IRA.


Pros

  • Potential for future tax-deferred growth
  • Can make new contributions to rollover IRA3
  • Typically more investment choices and planning tools
  • Access to investment advice

Cons

  • Limited opportunity for early withdrawals without paying a 10% early-withdrawal additional tax (early tax is not due for amounts rolled over)
  • Loans are not available
  • Protection from creditors in bankruptcy only
  • Additional fees should be considered when moving assets to an IRA (for example, transfer fees may apply)

    Pros

  • Potential for future tax-deferred growth
  • Can make new contributions to rollover IRA3
  • Typically more investment choices and planning tools
  • Access to investment advice

    Cons

  • Limited opportunity for early withdrawals without paying a 10% early-withdrawal additional tax (early tax is not due for amounts rolled over)
  • Loans are not available
  • Protection from creditors in bankruptcy only
  • Additional fees should be considered when moving assets to an IRA (for example, transfer fees may apply)

Move the assets to your new employer’s retirement plan.


Pros

  • Access to potentially new investment choices
  • Avoid immediate taxes and a potential 10% early-withdrawal additional tax
  • Broad protection from creditor claims under federal law
  • Preserve tax-deferred growth potential
  • May not have to take a distribution at age 70½4
  • May be able to take a loan5

Cons

  • Some plans don’t allow rollovers5
  • There may be waiting periods or other restrictions5
  • Investment choices may be limited

    Pros

  • Access to potentially new investment choices
  • Avoid immediate taxes and a potential 10% early-withdrawal additional tax
  • Broad protection from creditor claims under federal law
  • Preserve tax-deferred growth potential
  • May not have to take a distribution at age 70½4
  • May be able to take a loan5

    Cons

  • Some plans don’t allow rollovers5
  • There may be waiting periods or other restrictions5
  • Investment choices may be limited

Convert all or a portion of the assets to a Roth IRA.


Pros

  • Qualified withdrawals are federal tax-free
  • Qualified earnings are federal tax-free
  • Able to pass potential earnings to heirs income tax-free6
  • Original account owner doesn’t have to take required minimum distributions (RMDs)6
  • Potential hedge against rising taxes

Cons

  • Income taxes paid when you convert the assets
  • Loans are not available
  • Limited opportunity for early withdrawals
  • Protection from creditors in bankruptcy only
  • Additional fees should be considered when moving assets to an IRA (for example, transfer fees may apply)

    Pros

  • Access to potentially new investment choices
  • Avoid immediate taxes and a potential 10% early-withdrawal additional tax
  • Broad protection from creditor claims under federal law
  • Preserve tax-deferred growth potential
  • May not have to take a distribution at age 70½4
  • May be able to take a loan5

    Cons

  • Some plans don’t allow rollovers5
  • There may be waiting periods or other restrictions5
  • Investment choices may be limited

2 Decide which choice works for you

Everyone’s situation is different. There are many factors that you’ll want to take into consideration when deciding which choice, or combination of choices, is appropriate for you. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, and tax treatment and provide different protection from creditors and legal judgments.

These are complex choices and should be considered with care. Your Merrill Lynch financial advisor can help you better understand the choices, so you can decide which works best for you—based on your personal goals, financial needs and circumstances, and priorities.

3 Discuss your choice with your Merrill Lynch financial advisor

Your Merrill Lynch financial advisor can answer any questions you may have and help you understand how the choices align with your personal retirement goals and overall retirement plan.

As with all investment decisions, there are potential benefits and disadvantages for each choice, including those outlined in this educational overview. Also, keep in mind that in some situations, your choice is irreversible.

The information we are providing is educational in nature. We are not recommending a specific choice relating to your employer-sponsored plan assets.

Asset allocation does not assure a profit or protect against a loss in declining markets.

1 Existing retirement plan assets do not include Roth employer plan assets.

2 If any portion of your employer plan account balance is eligible to be rolled over and you do not elect to make a direct rollover (a payment of the amount of your employer plan benefit directly to an IRA), the plan is required by law to withhold 20% of the taxable amount. This amount is sent to the Internal Revenue Service as federal income tax withholding. State tax withholding and a 10% early-withdrawal additional tax also may apply.

3 If eligible.

4 A Required Minimum Distribution (RMD) is the minimum amount the account holder of a traditional IRA or qualified retirement plan must withdraw annually upon reaching age 70½ (or, if later, the year in which the participant retires for qualified retirement plans). The RMD can be taken any time during the year but no later than December 31. For the year in which the owner turns 70½, the deadline is extended until April 1 of the following year. Failure to take all or part of a RMD results in a 50% additional tax applicable to the amount of the RMD not withdrawn.

5 Contingent on specific plan rules.

6 Original Roth IRA account owners are exempt from taking Required Minimum Distributions (RMD). Beneficiaries are required to take RMDs from inherited IRAs. A spouse beneficiary may elect to treat an inherited Roth IRA as his or her own and would not have an RMD requirement during his or her lifetime.

If you open an Individual Retirement Account (IRA) with us, depending on the services you choose, Merrill Lynch, Pierce, Fenner & Smith Incorporated will act in the capacity as an investment advisor or a broker, and our role and obligations will vary as a result.

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