Between high contribution limits, tax advantages, and potential employer matching, a 401(k) can be a homerun for your retirement savings.
But if you’ve moved on from your 401(k) employer or are planning a transition soon, do you feel prepared to handle your retirement plan?
Consider these options for managing your 401(k) savings after you leave your employer:
Keep your current 401(k)
Logistically, this is your easiest option. Unfortunately, some employers don’t offer this once you’ve left. It’s best to check with your HR department to understand what’s available.
Rollover to a new 401(k)
If your new employer offers a 401(k) plan, you can likely rollover your existing plan. This will allow you to continue taking advantage of 401(k) benefits like employer matching and high-contribution limits. However, you will be limited in your investment options based on your new employer’s plan.
Rollover to an IRA
If your current employer doesn’t offer a 401(k), you could choose to roll your savings into an individual retirement savings (IRA) account. An IRA offers more flexibility and choice with your investments, but does have a lower yearly contribution limit than a 401(k). This might be your only option if your new employer doesn't offer a 401(k). Some individuals prefer to roll their money into an IRA anyway upon leaving their former job, regardless if their new employer offers a 401(k) or not.
Withdraw your money
If you need extra cash today to cover expenses, you can choose to withdraw funds from your 401(k). Keep in mind, you will pay taxes on your contributions, plus a penalty for early withdrawal. I rarely recommend this option unless you're over the age of 60 and are in a tight spot for cash.
Navigating your 401(k) is just the tip of the iceberg in retirement planning.
In addition to guiding individuals, we also offer employer plans that empower their employees to save more for their future. The businesses we work with love the added benefit that their employees have access to an advisor to help them with their financial needs. It's also a great "perk" for attracting and retaining employees.