No 10% penalty on distributions on early withdrawals
If you retire from a company, or lose their job at age 55 or older, can withdraw money from that account without having to pay a 10% penalty. That is not the case once you roll your 401(k) into an IRA. The IRA rules require you to wait until age 59 1/2 to gain access to those funds without penalty.
New regulations were instituted last August by the Department of Labor requiring 401(k) plan sponsors to provide simplified disclosures showing administrative expenses and fees to employees. This helps employees in two ways: obviously with new disclosures, fees can more easily be compared apples to apples with other investments, but there is something else. The disclosure itself may have driven down fees as employers sought to negotiate lower fees in their plan, with many large plans being successful simply because they have the clout to negotiate a more favorable fee structure. Smaller plans, on the other hand, may also be able to provide reduced investment expenses because of institutional pricing on investments or “break points” in commissions that they can achieve.
Low or no cost Financial Guidance and Advice
Many employers offer free or low cost guidance through workplace sponsored programs. Alternative options such as online advice programs such as Financial Engines are becoming popular to help employees make decisions about investing their 401(k) assets.
Protection from lawsuits
Retirement plan such as 401(k)s, are protected under federal law but IRAs are protected under state law which can vary state to state. 401(k)s are generally much safer from creditors than your IRA. IRAs are protected against bankruptcy up to a limit, but not personal lawsuits.
Ability to borrow against the funds
One cannot borrow from an IRA, but many 401(k) plans have loan provisions that allow you to borrow against your funds while you are actively employed with your company, some plans may offer the same benefit in retirement
Access to Stable Value Funds
IRAs offer greater control and a wider possiblity over where you can invest. Stable value funds, however, are generally only avalable in 401k accounts. Stable value funds are capital preservation investment options available in 401(k) plans. They are invested in a high quality, diversified fixed income portfolio that are protected against interest rate volatility by contracts from banks and insurance companies.