Transferring Jobs? Transfer Your 401(k)!

Starting a new job can have you focused on the future, but don’t forget the savings you accumulated in the past! If your former employer offered 401(k) or 403(b) savings options, make sure you take it with you to your new employer so that it’s easier to keep track of your retirement savings. Here’s what you’ll need to do to make sure your previous savings won’t be left behind!

You have four options for transferring your retirement savings when you change jobs:

1. Keep it where it is- Many employers allow you to keep your account after leaving the company. There are a few reasons why you may want to do this, including better investment options or lower fees compared to your new company’s retirement policy. However, once you leave the company you may be subject to higher maintenance fees than you were before.
If considering this option, you should keep in mind a few things, like the restrictions that may come with having less than $5,000 in the account, whether your stock investment options included investments in your previous employer, whether your account is fully vested, and increased fees that may be tied to keeping the account open.

2. Transfer to your new employer’s plan- The obvious benefit to this is that you can take advantage of what your new employer offers and more easily keep track of your retirement. Just contact the administrator of your previous employer’s plan and request a “Direct Rollover.” Using these exact words is important because you save on fees and taxes when you roll over (or transfer) directly vs. indirectly because the check is made out to your new plan, not you personally.
In the case that an indirect rollover is initiated, you’ll essentially be withdrawing the money and redepositing it into your new 401(k) yourself, which may complicate your taxes.

3. Roll over into an individual retirement account (IRA)- In the case that your new employer doesn’t offer investment options that fit you and keeping your old plan complicates things, you may opt to open an IRA.
After you choose and open your new account, this option functions much like a direct rollover to a new employer’s account. You’ll request a direct rollover from your previous administrator, and your new account should direct you on how and to who to send the check. Typically, if the money is deposited within 60 days, you shouldn’t face any penalties.

4. Cash-out your 401(k)- Are you considering just cashing out your 401(k)? This is an option, but it can come with some serious strings attached. Because you’re withdrawing early from a retirement account, you may face steep penalties in addition to tax complications, because this money is now considered income. Make sure to weigh the pros and cons and do the math before considering whether cashing out is the best option for you.

It can be easy to forget about your accumulated retirement savings when starting the next chapter of your career. However, it’s money you’ve saved, and you deserve to reap the benefits when you retire. Set up a meeting with a financial advisor today to discuss which option is the best fit for you!

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