Yesterday, I wrote briefly about the pitfalls of handling an inherited IRA. One useful tidbit of information as it relates to 401k and 403b retirement plans is that if you are retired, you should consider converting your existing 401k and 403b plans into a rollover IRA. This is because many companies have restricted options for handling inherited 401k or 403b plans.
Your company's plan may require your beneficiaries to liquidate the accounts upon your death thus losing any tax benefits to keeping in such a vehicle and creating a tax liability. If you rollover your 401k or 403b accounts to a rollover IRA, your beneficiaries will be able to make more choices about how to handle their inheritance.
It sounds like a hassle, but once you get the forms from your company's plan, complete them and set up a rollover IRA account, the transfer can happen in as little as two weeks. Plus if you are working with a financial advisor, he or she would be more than happy to assist you with the leg work. Do I think financial advisors are a good thing? Hmm, that's a post for another day.
