A rollover IRA versus keeping your 401(k) comes down to 5 things: investment choices, costs, access before 59½, creditor protection and simplicity, and First Premier Bank financial advisors compare them with your numbers. Neither choice wins for everyone.
If you left the service and took a second-career job, you may hold a Thrift Savings Plan balance and an old employer 401(k). Each one is its own decision with its own due date, so we take them one at a time.
The two options in one table
Read the rows that matter to you first. For many veterans that is the age 55 rule and the cost line; for others it's simplicity. Details vary by plan, so the right-hand column describes what a typical employer plan offers, not every plan.
| Roll over to an IRA | Leave it in the 401(k) | |
|---|---|---|
| Investment choices | Very wide menu | Plan's fixed list |
| Costs | Varies by custodian and funds | Varies; some plans are cheap |
| Penalty-free access at 55 | No; usually 59½ | Yes, if you leave that employer at 55+ |
| Creditor protection | Varies by state | Strong federal protection |
| Simplicity | One place for several accounts | Another login to keep |
| Loans | Not allowed | Sometimes offered |
Can I take money out at 55 if I roll it over?
Usually not without a penalty. A 401(k) from an employer you left in or after the year you turned 55 allows penalty-free draws before 59½, while an IRA generally does not, though regular income tax still applies to both.
Say you retire from a second career at 56 and want $30K a year from this account until a pension or Social Security starts. Rolling it all into an IRA could close that door. Keeping it in the plan, or rolling only part, may keep it open.
Should I roll over my TSP too?
Not automatically; the TSP is its own decision. Its costs are often very low, and you can't buy most outside funds inside it, so the trade is usually choice and flexibility against cost. First Premier Bank runs a TSP to IRA rollover review as a separate step, with the fee arithmetic written out.
For illustration: a 1% all-in cost on $500K is $5,000 a year, while 0.1% is $500. That $4,500 gap has to buy you something you'll actually use.
How to decide
Work through the questions in order, since the first one can settle it. Every investment carries the risk of loss, including the money you started with, in either account.
Military pension, Survivor Benefit Plan choices and tax planning for veterans can change which account you should draw from first, so those get decided before the rollover.
- Age: if you're 55 or older and might need the money soon, price the penalty-free access first.
- Costs: ask the plan administrator for the fee disclosure and compare it with the IRA's all-in cost.
- Choices: list the funds you'd actually buy and check whether the plan offers them.
- Paperwork: ask for a direct rollover so no check is made out to you; the 1099-R should show it as a rollover.
- Income: before moving money, estimate the tax cost of any part you convert to Roth.
Frequently asked questions about First Premier Bank
Is a direct rollover taxable?
Can I split an old 401(k) between an IRA and the plan?
Does a rollover IRA cost more than a 401(k)?
This is general information and education, not individual investment, tax, or legal advice. Investing involves risk, including loss of principal. Before making any financial decision, talk to a qualified professional about your specific circumstances.