Retirement Plan Considerations When Changing Jobs

Times have changed and most of us will have a number of employers over our lifetime.  When changing jobs it is important to consider the options for your 401k or other qualified retirement plan.  Experience has shown that many people move through job changes leaving retirement assets scattered at prior employers, or simply end up “cashing out” of their retirement plans often paying taxes and early distribution penalties—not necessarily a prudent approach to retirement planning.  Under the assumption that most people will not change jobs, assuming a reasonable account balance, until they are vested—the following are usually options:

• The account can be left with the existing employer*
• The account can be transferred to the new employer’s plan*
• A direct rollover of the account may be made to a self-directed IRA account*
• Other potentially less attractive options due to penalties*

Because of the varied options available and the potential time restrictions in making them, it is important to do your homework.  If you need assistance, you can consult your human resources department for guidance on what options are available to you although they will likely avoid “advising” you on your decision.  You may also wish to enlist the assistance of a tax or financial advisor.

*Proper planning is critical in making decisions as it relates to 401k and other retirement plans.  Before making any decisions regarding tax planning or changes to your plan, including issues related to a job change, you should consult the proper department of your employer, a tax professional and your financial advisor