Whether you’re part of the Great Resignation, laid off or fortunate enough to retire early, you need to keep your retirement investments working hard. It may not be top of mind as you make the transition, but you need to think about what to do with your 401(k) or other employer-sponsored retirement accounts.
Here are some important things to consider:
When deciding what to do with your money in a former employer’s retirement plan, you don’t need to take immediate action. You may want to speak with a financial advisor first to discuss your options.
If your balance is $5,000 or more, you may be able to leave your funds right where they are until you get acclimated and then decide on an appropriate course of action.
If you leave your money in a former employer’s plan, make sure you keep tabs on it. Remember, a 401(k) account is a long-term investment, and things can change over time. Make sure you know who to contact if you need to access those funds.
Every plan comes with its own costs and features, fees and expenses, investment choices, and retirement payment options. Carefully review and compare the costs associated with a former employer’s plan, a new employer’s plan and any potential IRA.
Cashing out your 401(k) might sound appealing, but be cautious. Before you choose to cash out, make sure you understand the costs of doing so. If you are under age 59 ½, you will have to pay a 10% early withdrawal penalty on top of any state and federal taxes, which could reduce your sum by as much as 40%. You may be better off just letting those funds sit and remain invested on a tax-deferred basis.
Understanding your options regarding a former employer’s retirement plan can help you take control of your investments. If you need assistance or want to discuss your financial situation, contact us. We are here to help you make appropriate financial choices for your current situation and long-term goals.