Even though we usually accept new positions for positive reasons, changing jobs can still be stressful, especially on finances.
One of those financial stress factors is deciding what to do with your retirement savings plan from your former employer. When it comes down to it, you really only have four options of what to do with the money.
Leave it where it is.
Many former employers will allow you to leave what you have accumulated in assets in the current plan. Rarely will you be able to add more to it, though.
Transfer it to your new employer’s plan.
Oftentimes, you’ll have the option to roll over your old savings into your new employer’s 401(k) plan. However, once you do that, you’ll be subject to the guidelines and investment choices of the new employer, so be sure to research the new plan carefully before deciding to add additional money to it.
Take a distribution in a lump-sum.
Generally, this is going to be the least desirable of your four options, as penalties for early withdrawal and taxes can eat away a large percentage of your savings. Twenty percent of the lump-sum check must be withheld for federal taxes off the bat, and if the balance is not deposited in another retirement plan or an IRA within 60 days, the entire amount becomes taxable. Plus, if you’re under 59½, you’re subject to an additional penalty of 10 percent.
Roll over into an IRA.
This is often the most logical choice, as it allows you to continue tax-deferred accumulation on funds. This choice also affords you the greatest flexibility and control of your retirement assets, and gives you the most options when it comes to withdrawing any of your funds.
Use these options as a guide when making a decision about what to do with your retirement funds when you switch jobs, and if you require additional guidance, feel free to stop by Fidelity Bank for an in-depth and personalized look at your specific financial situation