Congratulations on your new job! As you navigate through a new onboarding process, you stop suddenly when you get to the discussion of retirement plans. And then you think: What about my plan at my previous employer? What do I do with the money in that account?
Good question.
You have four options for the money you’ve saved in your existing retirement account. Let’s take a look:
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. If you like the plan’s options and benefits, consider leaving things as-is. However, make sure that you won’t incur special fees to participate or restrictions to withdraw money at a future date.
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.
Option 3: Cash Out
You may elect to withdraw your money in cash, 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: Direct Transfer into an IRA
You can also directly roll all or part of your money into an Individual Retirement Account (IRA); if the former, 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 savings.
Download
“12 Common Financial Mistakes to Avoid“
for Free!
Many people spend 10, 20, and 30 years working and end up with very little savings. Don't be one of them! Avoid these 12 financial mistakes so you can build wealth over your lifetime. Share them with friends, share them with family.
By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact
Notes
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
©2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.
#05078122
