Changing jobs can impact your retirement plan. To minimize disruptions to your contributions and the vested portion of your previous employer’s contributions, it’s important to understand the choices you may have when you make a career transition. We offer the following key considerations:
Option 1: Stay
Your previous employer may allow you to keep the money in your plan, an attractive option that keeps things undisturbed while allowing you to accumulate tax-deferred earnings potential. While you cannot make further contributions, you still maintain control of how the money is invested. Typically, annual distributions must begin after you reach age 70 1/2.
Option 2: Let ‘Er Roll
You can transfer the money into your new employer’s plan, which continues your tax-deferred growth potential. However, there may be rules associated with rolling over your money. Review your new plan and restrictions carefully before selecting this option. If you take money out, withdrawals will be taxed at current rates, with those made before you reach age 59 1/2 subject to a 10% additional federal tax.
Option 3: Cash Out
You may elect to withdraw your money in cash either in a lump sum or in installments, though you’ll face tax consequences: Distributions incur a 20% federal withholding as well as standard income tax. And if you’re under age 59.5, you’ll pay an additional 10% federal tax. State and local taxes may also apply, which collectively could sharply reduce the amount you retain.
Option 4: Transfer into an IRA
You can also roll all or part of your money into an Individual Retirement Account (IRA). If you do so within 60 days, you’ll avoid both penalties and withholding taxes. An IRA offers continued tax deferral for retirement, though check whether fees or commissions will be assessed.
Depending on your circumstances, the money that you accumulate in an employer’s plan may be a major source of retirement income. How you choose to manage it can have a profound impact on your retirement savings. Discussing the options with a financial professional can help maximize your savings.
If you would like more information on managing your retirement plan when switching jobs, call Carla Baily, CERTIFIED FINANCIAL PLANNER™ at 918.361.2581 or email firstname.lastname@example.org.
Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
This material was prepared by LPL Financial, LLC
*Specific individualized tax or legal advice not provided. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Security Bank and Security Investment and Retirement Services are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Security Investment and Retirement Services, and may also be employees of Security Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of Security Bank or Security Investment and Retirement Services. Securities and insurance offered through LPL or its affiliates are:
Not Insured by FDIC or Any Other Government Agency
Not Bank Deposits or Obligations
The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.