Should You Leave Your Amex RSP at the Company or Roll It Over?
By the time you retire, your American Express Retirement Savings Plan (RSP) is likely to be one of your most significant assets. One of the most important decisions you’ll face is what to do with it: Should you keep your funds in the company’s RSP or roll them over into an IRA?
Each option has its own advantages, and understanding the implications of your choice can profoundly impact your financial future.
As a senior leader at Amex, you’ve worked hard to build your retirement nest egg. Now, it’s time to focus on protecting and maximizing it.
Why Consider Rolling Over to an IRA?
Your RSP is a 401(k) plan, which means it offers many of the same rollover benefits you’ve heard about: broader investment options, greater flexibility, and the potential for a more personalized retirement strategy.
Here are some key advantages of rolling over to an IRA:
Broader Investment Options: IRAs typically provide a wider range of investments than the 20 or so available in the RSP. While the Personal Choice Retirement Account (PCRA) offers more mutual fund options, it often includes transaction fees. In contrast, IRAs allow access to individual stocks, bonds, ETFs (exchange traded funds), and a broader selection of mutual funds—without many of those limitations.
Flexible Beneficiary Designation: IRAs generally have more options in naming beneficiaries, which is particularly valuable for those thinking ahead about wealth transfer and estate planning.
Easier Access to Funds: IRAs tend to offer increased flexibility in how and when you withdraw funds, allowing you to tailor distributions to your evolving needs.
Simplified Required Minimum Distributions (RMDs): When it’s time to take RMDs, managing one consolidated IRA account is often easier than juggling multiple retirement accounts.
Consolidated Accounts: Rolling multiple retirement accounts into a single IRA simplifies portfolio oversight, helps streamline withdrawal strategies, and can support more tax-efficient planning.
If you choose to roll over your RSP, be mindful of avoiding common pitfalls:
Opt for a Direct Rollover: Make sure the check is payable directly to your IRA custodian—not to you, personally—to avoid unnecessary taxes.
Understand the Tax Implications: If you hold American Express stock in your RSP, be sure to explore potential Net Unrealized Appreciation (NUA) strategies. This could provide meaningful tax benefits if executed correctly.
Why Consider Leaving Your Funds in the Plan?
There are also smart and strategic reasons for keeping your funds in the American Express RSP, especially if you’re retiring early or value specific benefits of the plan.
Penalty-Free Early Withdrawals: If you leave the company during the year you turn 55 or later, you can begin taking distributions from your RSP without paying the early 10% withdrawal penalty. This flexibility is lost if you roll the funds into an IRA, where early withdrawal penalties apply until age 59½. If you continue working elsewhere, you can still access the Amex RSP—something that many people don’t realize.
Cost-Effective Investment Options: While IRAs offer more investment choices, they can also incur higher fees. The American Express RSP features options like the Stable Value Fund, which is designed to preserve principal with a steady share price and is available only in select 401(k) plans.
Creditor Protection: 401(k) assets typically enjoy stronger protection from creditors under federal law than IRAs do. This is particularly valuable for people in higher-risk professions that are subject to malpractice suits.
Making the Right Decision for You
There’s no one-size-fits-all answer. The right move depends on your personal goals, risk tolerances, tax situation, and the lifestyle you envision in retirement.
The good news? You don’t have to navigate this decision alone. Working with a financial professional can give you the clarity and confidence you need to move forward with a plan that aligns with your future.
I specialize in helping American Express employees evaluate their retirement options, avoid costly mistakes, and craft strategies that reflect their financial priorities.
