Saving for retirement is a good idea, and it’s one that most of us take advantage of through our own personal retirement plans or through those offered by our employers. But what happens when you have decided that you no longer want to or can work for the same company any longer and you change jobs? Do you go ahead and take that money with you, cash it out, roll it over? How do you handle that situation? It’s not one you likely thought of anytime in your career unless you were in that situation, but we have a few suggestions for how to handle it when you do decide a career change is in the picture. Here are your options.
Leave It Alone
Some plans allow you to leave your money alone and don’t make you move it. The only difference will be that your old employer will no longer contribute to it if they were in the past. They will also have no more access to the account.
You can take that money and do whatever you want with it; it’s yours, after all. However, know that you will be taxed on that money as income for that tax year. Additionally, there is a 10% penalty for making early withdrawals from this account, too.
You can open up a new 401(k) and move the money into that, especially if you have a new plan with your new employer. The only consideration to make here is whether or not your new plan allows transfers from old plans. However, it’s usually fine.
Roll That Money into an IRA
To avoid taxes, transferring your money into a traditional IRA is the best idea. If you have a Roth 401(k), however, you’d transfer into a Roth IRA. The concept is simple and really takes very little effort on your part.
Now that you know your options, take the time to consider how to best handle your retirement money. It’s up to you, but some decisions are clearly better than others in many situations.
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