What To Do With Your Retirement Account When Leaving a Job

by | Oct 2, 2013 | Asset Management, Podcasts

It’s a big decision deciding what to do with your retirement account when leaving a job or retiring, and many people don’t know that they have several options. Tom and Brendan discuss these options in this week’s Mullooly Asset Management podcast. There are four clear choices investors have when choosing what to do with their 401k account, 403b annuity, or 457 deferred compensation plan after moving on from a job. Tom and Brendan lay these options out for listeners, and talk about each one. If you’ve been wondering what to do with your retirement account when leaving a job, this is information you need to learn.

The first option investors have is to just take the money. As Tom and Brendan discuss, this is probably not the smartest thing to do. However, sometimes situations arise where people change or leave jobs and they need money. What you need to understand is that if you are under 59 1/2 years old and you cash out of your retirement account, you will incur an early withdrawal penalty. This penalty is 10% of the gross amount of the account. The distribution will also be subject to federal and state taxes. This is a true last resort move for investors, and one that should be avoided if possible.

What Should I Do With My Retirement Account?

If you’re wondering what to do with your retirement account when leaving a job, you might not have to do anything. That’s right. If you’re comfortable with the investment choices offered by your former employer, you can leave your money where it is. Again, probably not the best option out there for investors, but something that can be done.

Another option investors have is to roll the money into a retirement account with their new employer. Not every employer allows rollovers from previous positions. If your new employers does, then this is an option for you. You’ll obviously need to take into account whether you like their retirement plan and its investment options. Your new employer could have a terrific retirement plan or a lousy plan with limited options. It all depends on your situation.

If you really want to know what to do with your retirement account when leaving a job, your best option is probably going to be rolling the money over into an IRA. This is likely your best option for a few reasons. Rolling money from a retirement plan into an IRA is a tax free move. IRA’s offer unlimited choices for investments, which is very different from a 401k, 403b, or 457 deferred comp. You can invest your money exactly how you and your investment advisor see fit, without restrictions or limited investment options to worry about.

There’s plenty more information about what to do with your retirement account when leaving a job in this week’s podcast. Make sure to tune in and contact Mullooly Asset Management with any questions.

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