It is rare for someone to stay at one job for the entirety of their career. In fact, many people change jobs multiple times to move up the corporate ladder. If you are in the process of moving to a new employer, there is an important financial decision you need to face: how to handle your employer-sponsored retirement account.
Here is an overview of the options you can consider for your employer-sponsored 401(k):
Cash Out the Account
You can cash out your old account – but be aware that this might be one of the worst choices you can make. If you pull the money prematurely, it will trigger a tax bill and possibly early-withdrawal penalties! In addition, you may be disappointed to see the amount of money they will have left after cashing out.
Plus, this decision destroys your nest egg and puts your retirement savings plan at risk.
Leave the Money in the Original Plan
you might have the option to leave the money in the original plan. This solution is easy, especially if you feel like it is a good plan.
But there may be a few disadvantages. For example, you might only have a set number of available investment changes or be charged additional maintenance fees since you no longer work for the company.
Roll Into a New 401(k) Plan
Does your new employer offer a 401(k) plan? Then you might choose to roll the money into this new plan. The advantage is that it is nice to have your money in one place to make it easier to manage. Additionally, you might have different investment opportunities with the new company.
A potential disadvantage may be that the new employer does not offer investments that you prefer.
Roll into an Individual Retirement Account (IRA)
Another potential option is to move the 401(k) funds into an IRA. This option gives you flexibility and control over your retirement savings. There are unlimited investment choices to choose from, and a financial advisor can help you select the right type of account. Additionally, you may have more flexibility to select beneficiaries.
Possible disadvantages lie in the potential tax burden if you are not strategic about how the money is moved. Avoid this issue by working with a financial advisor to ensure that the money is transferred directly from the employer-sponsored plan to the new IRA.
Personalized Retirement Advice
If you want personalized recommendations, then contact us at Bulman Wealth Group. We offer comprehensive financial planning, including retirement savings and more.