 | | |
What happens if I change jobs?
| |
When you leave a job, you generally have three options for handling your retirement account: Leave it with your old employer, transfer it to a separate IRA account, or roll it over into your new employer's retirement plan. There's a fourth option--cashing out your account--but it's costly and we don't recommend it.
| |
|
Why even consider leaving it with your old employer? The main reason is if the investment options in your old plan are better than those in the new one. Since there's no cost or penalty for keeping your money in place (though sometimes you'll be hit with minimum balance requirements or investment restrictions), you might as well stick with the better plan. The biggest drawback to this option is that you'll have to keep dealing with your old company, filling out paperwork and the like.
| |
|
Another option is to put the money in an IRA. Like a 401(k) and other defined-contribution plans, an IRA protects your nest egg from taxes. You also can put the money in any investment you like. But you'll have to log more time and effort researching the funds or stocks for the IRA.
| |
|
Finally, if your new employer offers a retirement plan with an attractive range of investment options, then the best tactic may be to take your money with you. Roll the account directly to your new plan, and you'll have all your assets in one place.
| |
|
A final word of advice: Make sure that your old employer transfers your money directly to your new employer or IRA, rather than to you, to avoid having 20% of your account withheld by Uncle Sam. And if you do somehow end up with the money, make sure you transfer the money within the 60 days allowed by the IRS before penalties set in.
| |
|
