Changing jobs? Here are four options for your existing retirement account.
You’ve worked hard to build your retirement savings through an employer-sponsored retirement account. That’s why, no matter how much money is in your account, you want to maximize your savings for the future. That may seem simple if you stay at your current job through your entire working life, but what if you change jobs? Do you know what to do with your existing retirement account?
If you’re preparing to make a job change, or may consider a change in the near future, consider these four options for your employer-sponsored retirement plan.
Stay in your current plan
While you’re moving on from your old employer, there’s a chance you can leave your retirement funds in your old plan. Logistically, this may be the easiest option as you wouldn’t need to take any action on your part. Just be aware that this option will only be available for certain plans, and there may be some restrictions for keeping a retirement plan with an old employer. Consider discussing these with your HR department or plan administrator to see if this is an option for you.
Rollover into a new employer plan
If your new employer is offering a retirement plan, you may have the option to roll your existing plan over with your new employer. Because you are moving from one retirement plan to another, you shouldn’t incur any tax liability for the transfer. To complete a rollover, you’ll likely need to speak with your plan administrator, complete the applicable paperwork, and request a transfer of funds from your old plan.
Rollover into an IRA
If you can’t roll over your plan with your new employer, you can still roll it over into an IRA account. This option may help to keep the tax-advantaged status of your retirement account and help you continue saving toward retirement. If you decide on this option, attempt to complete a “trustee-to-trustee” to help avoid a taxable event. Once you’ve completed your rollover, your funds can continue to grow on a tax-deferred basis until retirement.
Cash out
If you need the money from your retirement plan today, you can always cash out. Just be aware that if you are under age 59 ½ you will likely be required to pay income taxes on your account balance plus an early withdrawal penalty up to 10%. This isn’t necessarily the most financially beneficial option, but it will give you access to your money immediately, which could help if you are looking to put a down payment on a home or use the cash for another reason.
Things to consider
What to do with your retirement plan is a personal decision, and may not be the same for everyone. But before deciding whether to rollover your plan, cash it out, or do anything else, keep in mind these factors that could play a role in your decision:
● Your age
● Your account balance
● Restrictions on your current retirement plan
● Rollover restrictions on your new plan
● Your need for liquid cash
Take control of your retirement plan! Consider these options when changing jobs, and reach out to us directly with any questions or concerns.
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