A quiz from Kiplinger tests whether your rolled-over 401(k) assets sit safely inside an IRA or face hidden vulnerabilities. The short assessment examines ten areas where retirement savers commonly expose themselves to unexpected risks during and after a 401(k)-to-IRA rollover.
Rolling money from an employer 401(k) plan into a Traditional or Roth IRA offers flexibility and often lower fees. Vanguard, Fidelity, and Charles Schwab all offer IRA accounts designed to receive these rollovers. But the process creates blind spots for many investors.
Common vulnerabilities the quiz likely addresses include creditor protection gaps. A 401(k) at your employer receives stronger legal protection under ERISA rules, particularly from lawsuits and creditor claims. An IRA offers less comprehensive protection depending on your state. Some states, like Florida and Texas, shield IRAs almost completely. Other states leave IRAs partially exposed. Moving money between accounts without understanding these differences puts assets at risk.
Beneficiary designation mistakes represent another danger zone. When you roll over a 401(k), your named beneficiary from the old plan does not automatically transfer to your new IRA. Missing this step leaves your assets in limbo if you die unexpectedly. Your estate could face unnecessary taxes and legal fees.
A third area involves required minimum distributions (RMDs). Traditional IRA withdrawal rules differ from 401(k) rules. IRAs require distributions starting at age 73 beginning in 2023. Some 401(k)s allow you to delay RMDs if you still work. Rolling over erases this option.
Tax complications also emerge. A partial rollover executed carelessly can trigger unexpected income tax bills. Failing to complete a rollover within 60 days converts it into a taxable distribution instead. Non-spouse benefici