Leaving Your Employer? Here are Some Options for Transitioning Your 401(k)

If the end of the year brings some big changes, like a promotion or new job, you might have some financial homework to do before you make the change. When you leave one employer for another (or to go into business for yourself), you have options for transitioning your 401(k). After all, the investment is the result of your savings over the time you spent with your employer.

Here are some options available to you when transitioning your 401(k):

Option 1: Keep Your 401(k) Where it Is

In some situations, you may be able to simply leave your 401(k) where it is. Depending on your employer’s policy or specific plan, you may be able to leave your 401(k) indefinitely.

However, this may not be ideal. If you find yourself moving to a new company every few years or so, it could become confusing to leave 401(k)s behind you at every former employer. Additionally, you may find it better to utilize the money for other investment purposes, rather than leaving it sit where you have it.

Option 2: Rollover Your 401(k) to an IRA

A popular choice for handling an old 401(k) is to roll it over into an IRA. This option allows you new opportunities for investment and provides tax incentives that protect your funds.

If you have multiple 401(k)s that you need to consolidate, rolling them into an IRA could be ideal for your situation. You can open one account and dump all of your old 401(k)s into it, bringing some welcome simplification to your retirement savings.

Option 3: Move Your 401(k) to a New 401(k)

You may have the option to move your old 401(k) into a 401(k) offered by your next employer. In this case, you gain the benefit of keeping your funds in a single account, rather than juggling two (or more).

If your new employer has awesome 401(k) benefits, you may find it advantageous to move your old 401(k) into your new one. Additionally, you can make this switch without taking a tax hit, making it a potentially appealing option for consolidation.

Option 4: Cash in Your 401(k)

There is, of course, the option to cash in on your old 401(k). This isn’t typically a popular route, since there are significant fees associated with cashing in early on a 401(k) — even one from a previous employer.

In some cases, though, the benefits of cashing in outweigh the negatives. Only you and your financial advisor can know for certain whether this option is best for your 401(k).

Deciding how to Handle an Old 401(k)

When you’re handling your retirement accounts, it’s important to view each investment as part of the bigger financial picture. The actions you take today can have impacts that last well into your retirement years.

If you want to learn more about using 401(k)s as part of your retirement plan, contact Jake Sturgill today to schedule a consultation!

    This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.