A variety of savings plans are available to help you prepare for retirement income needs. Generally, these fall into two categories: employer‑sponsored retirement plan accounts and Individual Retirement Accounts (IRAs). While both offer tax‑deferred savings, there are important differences between them.

When you retire, reach age 59½ while still employed, or leave your current employer, you must decide what to do with your existing retirement savings. The information below provides a high‑level overview of key differences between retirement plan accounts and IRAs, rollover options, and considerations associated with each choice.

Important: Investing involves risk. You should seek professional financial, tax, and legal advice before making any investment decisions.

How Are Retirement Plan Accounts Different from Individual Retirement Accounts (IRAs)?

Difference Retirement Plan Account Individual Retirement Account (IRA)
Definition Employer‑sponsored plans allow you and your employer to contribute toward retirement savings. Employers perform many administrative tasks to help plans receive favorable tax treatment. An IRA is owned and controlled entirely by you. All decisions regarding administration and investments are your responsibility.
Investment selection and monitoring Plan fiduciaries select and monitor investments in the best interest of participants. You are solely responsible for selecting and monitoring investments.
Investment choices Limited to employer‑selected investment options. Access to a wide range of investment options.
Acceptance of rollovers May or may not accept rollovers from previous employer plans or other qualified accounts. Generally accepts rollovers from employer plans or other IRAs.
Fees May offer lower‑cost investments through institutional pricing. Often uses retail investment pricing; lower‑cost share classes may require higher balances.
Fee disclosure Subject to Department of Labor regulations that require detailed fee disclosures. Not subject to DOL rules; disclosures are governed by SEC requirements.
Fee payment Some plans absorb administrative and non‑investment fees. Investors generally pay all administrative fees directly.
Access before retirement May allow loans or hardship withdrawals, but distributions are generally restricted before separation from service. No loans available, but taxable distributions may be taken at any time.
Tax treatment of distributions Distributions are taxed as income unless rolled over. Mandatory 20% withholding applies to certain distributions. Distributions are taxed as income unless rolled over; no mandatory withholding applies.

* Information adapted from U.S. Government Accountability Office (GAO) Report GAO‑13‑30 (March 2013).

What Are My Choices?

In most situations, you have four primary options for your retirement plan balance:

  1. Leave the balance in your previous employer’s plan.
  2. Transfer the balance to your new employer’s retirement plan.
  3. Roll the balance into an Individual Retirement Account (IRA).
  4. Cash out the balance.

What Advantages and Disadvantages Should I Consider?

Option Advantages Disadvantages
Leave balance in previous employer’s plan
  • Maintains tax‑deferred status
  • Potentially lower investment expenses
  • Access to employer‑selected investments
  • Investments monitored by plan fiduciaries
  • Subject to plan rules
  • Limited distribution options
  • Limited investment selection
Transfer to new employer’s plan (direct rollover)
  • Maintains tax‑deferred status
  • Potentially lower investment expenses
  • Professional fiduciary oversight
  • Subject to new plan’s rules
  • Limited access to distributions
  • Limited investment options
Transfer to an IRA
  • Greater investment flexibility
  • More control over distribution timing
  • Potentially higher investment expenses
  • Loss of certain plan protections
Cash out
  • Immediate access to funds
  • Taxes due on full distribution
  • Possible early withdrawal penalties

How Can I Obtain Additional Information?

This is an important decision. Additional information is available in the Special Tax Notice related to your plan, through the Auburn University Benefits Office, or from your retirement plan vendor.

Auburn University does not guarantee the results of any investment information. You are encouraged to seek independent financial, legal, or tax advice. Local advisors with Johnson+Sterling, Inc. are available to answer questions about rollover options.

Contact Johnson+Sterling, Inc. at lbusby@johnsonsterling.com or 334‑887‑5533 / 800‑451‑6861.

  • Some plans automatically distribute balances under $1,000 upon separation (29 CFR 2550.404a‑2).
  • Not all plans accept rollovers. In some cases, participants may choose a combination of options, such as leaving a portion of assets in the plan and taking a partial distribution.

Prepared exclusively for Auburn University by Johnson+Sterling, Inc.

Last updated: 04/09/2026