When you have a change in employment, there’s a lot to consider. If you have a 401(k) plan through your employer, you’re probably wondering what will happen to your account after your current employment ends. A few options are available to you, and each one offers advantages and disadvantages. In this post, we’ll offer a basic overview of common options for handling a 401(k) when parting with an employer. However, before making any major change, you may wish to discuss the specifics of your situation with a financial advisor.
A 401(k) is a common type of retirement account that many employers offer. It allows you to put money into an account with tax advantages and, in some cases, your employer may match part of that contribution. When you first select a 401(k) plan, you typically have several investment options. The intent of a 401(k) is to help your money grow through those investments so that the money is available to you when you are ready to retire.
As a plan participant, your 401(k) account options when changing employment will fall into one of four categories. Some options may not be available to all plan participants, and a combination of multiple options may also be possible.
Many companies will allow you to keep your 401(k) after employment ends. Many plans require at least $5,000 invested to keep the account, but restrictions may vary, and you should always check with your plan provider for complete details. One important consideration if you choose this option is that you will no longer be able to make contributions to the plan, but you may be able to change how the funds are invested.
Rolling over your 401(k) is a way to transfer the balance to another retirement account, and if your new employer offers a 401(k) plan, you may be able to roll over your funds into the new plan. Be sure to check the requirements for eligibility and verify that the new account is active before initiating the rollover.
If you are not starting a new job or your new employer doesn’t offer a 401(k), you might consider rolling over your funds to an individual retirement account (IRA). The investment options and fees for an IRA often differ from those of employer-based retirement plans, and several IRA account types are available.
You also have the option of withdrawing some or all of your funds from your 401(k); however, depending on your age, there may be a penalty for early withdrawal, as well as tax implications. Plan participants should carefully consider these costs and the potential reduction in future retirement income before cashing out a 401(k).
It’s important to research both your current plan and any new options before you make changes to your 401(k) or other retirement accounts. You may find it helpful to discuss the move with a professional before you commit to the change.
Deciding whether or not to roll over your 401(k) is an option that you may wish to discuss with a financial advisor. An advisor can work with you to determine how a 401(k) roll over might impact your retirement plan as a whole.
Harvest Wealth Partners offers financial planning and investment guidance for clients throughout Northwest Indiana. At your initial consultation, you can discuss your financial goals with a member of our team so we can better understand what you wish to accomplish. To learn more about Harvest Wealth Partner’s retirement planning services or to schedule an appointment, contact us today.
Harvest Wealth Partners is committed to helping our clients work towards a successful future. We believe in your potential to understand the financial options that can lead you to your goals. Call us today to partner with our team. We look forward to continuing our mission for years to come.
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