< 1 minute read|Published by FAIRWINDS

What Happens to Your 401(k) When You Leave Your Job?

There are several options you can take with your old 401(k) to make the most of what you’ve saved for retirement so far.

Person packing their desk.

You’re seeking a new job or making a career transition. You’re updating your resume, preparing for interviews, taking a few online education courses, and applying for available positions online. As you submit applications, you start wondering, “What should I do with my old 401(k) plan?”

You can take several options with your old 401(k) to make the most of your retirement savings. Here are five tips to help you go further with your 401(k) savings while embarking on a new chapter in your life:

Keep your old 401(k) where it is, and don’t do anything.

This is the easiest option, especially if you prefer the investment options of your old 401(k) plan. Make sure you keep an eye on the account and see if there are any penalties for not actively contributing to the 401(k) account.

Roll it over into your new employer’s 401(k) plan.

Consider rolling over your old 401(k) if your new employer offers a 401(k) program. Rolling your previous 401(k) also helps you save time by consolidating your retirement plans. You’ll manage fewer 401(k) accounts and continue building your retirement savings without a tax penalty.

Roll over your old 401(k) into an IRA.

Instead of keeping your 401(k) savings in a 401(k), consider rolling over your funds to an Individual Retirement Account (IRA). Two benefits of this transition include continuing tax-deferred growth and more investment choices. You can pick an IRA trustee with various investment options, and you’ll be able to quickly move your money between trustees if you don’t have an option you’re looking for. Rather than withdrawing the funds and completing the rollover yourself, ask your financial advisor to help you initiate and manage the rollover to avoid early withdrawal fees.

Don’t cash in your old 401(k) plan.

You might want to liquidate your previous 401(k) savings and use the funds for your current situation, like paying off debt or covering essentials. However, this option could prevent you from getting closer to your retirement goals. An early withdrawal of your 401(k) will include federal income taxes, a ten percent IRS early withdrawal penalty if you haven’t reached age 55, and any additional penalties charged by your 401(k) provider.

Speak with an advisor to weigh your options.

A financial advisor can help you weigh all the factors to make a confident decision to continue investing in your future.

Although there is more than one approach, remember that you’re in control of what you want to do with your 401(k) and the wealth you’ve built so far.

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*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA / SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Financial Advisors are registered to conduct securities business and licensed to conduct insurance business in limited states. Response to, or contact with, residents of other states will be made only upon compliance with applicable licensing and registration requirements. The information in this website is for U.S. residents only and does not constitute an offer to sell, or a solicitation of an offer to purchase brokerage services to persons outside of the United States.

CFS representatives do not provide tax or legal guidance. For such guidance please consult with a qualified professional. Information shown is for general illustration purposes and does not predict or depict the performance of any investment or strategy. Past performance does not guarantee future results.

**Before deciding whether to retain assets in an employer sponsored plan or roll over to an IRA an investor should consider various factors including, but not limited to: investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock.

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