Your Retirement Plan When Changing Jobs
Are you confused about what you should do with your 401k retirement plan when you change jobs? If so, you are not alone, the rules are a bit vague because the answer all depends upon your personal financial situation.
Your financial future depends on making good decisions about what to do with your retirement plan.
Your Money|Your Options
4 choices on how to handle your retirement plan balances:
- Leave your money with prior employer.
- Roll money over to new employers’ plan.
- Roll retirement account balance to an Individual Retirement Account.
- Withdraw the money; pay taxes and penalties when applicable.
What Works Best For You
Before you decide on which option to choose to use, learn more about what works for you. Start by checking out your new employers retirement plan.
Plan Or No Plan?
Does your new employer even offer a 401k retirement plan? If not, do not stop investing for your retirement. You can still direct future retirement contributions to an Individual Retirement Account.
You may consider keeping your money in your prior employer’s retirement plan if you prefer the plan investment options and features.
New Employer’s Rules
Some employers do not allow rollovers into their plan. If your new employer does not, you always have the option of rolling your prior retirement plan account balance into an Individual Retirement Account.
If you like what your old employer’s retirement plan offered in benefits and investments, you may consider leaving the balance in that plan.
Free Money Or Not?
Find out if the new employer will be matching your personal contributions into the retirement plan. If they do, max out your contributions. A match means more free money for you.
Investment Options May Vary
Learn about the investment options available in your new retirement plan. Retirement plans have become somewhat identical so many funds offered in one retirement plan are usually offered in other plans.
Will you be able to build a diversified portfolio with the investment options offered? Does the new retirement plan have the same investment options you had with your previous plan?
You want to always have a well diversified account. A retirement plan that offers an allocation of small cap, mid cap, large cap, international, index funds and target date funds can help you offset market swings much better.
Be careful if stock options are offered. If you have no experience with stop options you may want to avoid including them in your retirement plan. They can make your portfolio much more volatile; in a market already unsteady, you need stability, not volatility.