麻豆最新出品

Retirement, Investments, & Insurance for Individuals Build your knowledge 4 things you can do with 401(k) savings when leaving your job or nearing retirement

4 things you can do with 401(k) savings when leaving your job or nearing retirement

Don鈥檛 forget about that 401(k) you had with your previous employer. Here are four options for what to do with it, from keeping it where it is to rolling it into an IRA.
Office workers packing up a box
3 min read |

If you鈥檝e been part of the surge in job turnover in recent years, you may find yourself with a 401(k) tied to a former employer.

Why? That retirement savings plan was 鈥渆mployer-sponsored,鈥 meaning your employer offered it as a workplace benefit (and maybe even contributed to it) and your contributions came out of your paycheck. Now that you鈥檝e parted ways, the savings are yours,1 but you can no longer add money to the account because it remains tied to your former employer.

Fortunately, you have a few options for that 401(k) when you change jobs or approach retirement.

Let鈥檚 cover the basics of each option.

From tax implications to investment opportunities, each option for your 401(k) has nuances to consider. .

1. Roll your savings into an IRA.

Transfer your money into an individual retirement account (IRA).

  • Your savings can continue to be invested, with similar tax advantages. (Rolling a traditional 401(k) into a traditional IRA delays taxation. You also have the option to roll it into a Roth IRA and pay taxes immediately. This may be beneficial if you have less than $6,500 in the account鈥攖he annual limit for a Roth IRA鈥攁nd expect that your tax bracket in retirement will be higher than your current rate.)
  • You may have access to a wider range of investment options than what is usually available in 401(k) plans, including options for ongoing money management.
  • You can consolidate all of your retirement savings in one place by rolling in any savings from past employers.
  • You can keep contributing money to the account up to annual limits. Learn more about annual contribution limits.
  • Loans aren鈥檛 allowed, but you may be able to withdraw money before age 59陆 under certain circumstances.2

You can personalize an IRA as much or as little as you鈥檇 like.

With an IRA, you鈥檙e in control of your retirement savings. 麻豆最新出品 offers IRAs鈥攂oth traditional and Roth鈥攖hat have a variety of investment options and can be self-directed or managed for you.

2. Keep your money where it is.

Do nothing. If you meet the minimum balance鈥$5,000 through 2023 and $7,000 starting in 2024鈥攜ou can leave your savings invested in your former employer鈥檚 retirement plan, if available.

  • Your savings stay invested, with the same tax advantages.
  • You continue with the plan鈥檚 investment options and any changes to the investment lineup that they may make.
  • You can鈥檛 make additional contributions.
  • Your past employer may decide to make changes to the plan that impact your account by offering more or fewer services for you.
  • If you have an outstanding loan in your employer鈥檚 retirement plan, in most circumstances you鈥檒l be required to pay it back within a short time following your separation from service. You won鈥檛 be able to take a loan from your savings if you鈥檙e no longer employed with the company.2

3. Move your money to your new employer鈥檚 plan.

If you have a new employer offering a retirement plan, you may be able to transfer your previous savings into it. Contact your HR department for help getting started.

  • Your savings stay invested with the same tax advantages.
  • You might be able to roll in savings from other retirement plans.
  • You can keep contributing money from your new paycheck to your new plan.
  • The investment options will depend on what the new plan offers.
  • You may be able to take out a plan loan or withdraw money before retirement under certain circumstances.2

4. Cash out your account balance.

You also have the option to take your savings as a lump-sum cash distribution.

  • You get immediate access to your money, but you may lose up to 30% of it to taxes and penalties.
  • You鈥檒l miss out on any future growth or earnings.
  • The receipt of this money is considered income and may move you to a higher tax bracket, which means you might have to pay more in taxes.

 

For many Americans, employer-sponsored retirement savings make up the largest sum of money they have. And making an informed decision is in your long-term best interest. Here鈥檚 a quiz to help. But also know that you don鈥檛 have to go it alone鈥攚e're here to help at each step along the way.

 

Once you鈥檝e made a decision about your 401(k), check off the rest of your financial to-dos after leaving a job.

What鈥檚 next?

to consolidate accounts or initiate a rollover to an IRA with 麻豆最新出品. Don鈥檛 have one? We can help you get started with a rollover IRA.
Related content

1Did your 401(k) have a vesting schedule? Check before you withdraw any funds. Employees may not be able to keep employer matches and employer contributions that had not vested at the time of their termination or resignation.

2While loans are not allowed, you may be able to access money from a traditional IRA or 401(k) by taking a taxable distribution, although penalties will apply if you鈥檙e under age 59陆. IRS penalty-free withdrawals may become available at age 59陆. Some exemptions apply, such as expenses for certain medical care and first-time homebuyers; .

Investment and Insurance Products are:

  • Not insured by the Federal Deposit Insurance Corporation (FDIC) or Any Federal Government Agency.
  • Not a Deposit, Obligation of, or Guaranteed by any Bank or Banking Affiliate.
  • May Lose Value, Including Possible Loss of the 麻豆最新出品 Amount Invested.

The subject matter in this communication is educational only and provided with the understanding that 麻豆最新出品庐 is not rendering legal, accounting, investment, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment, or accounting obligations and requirements.

Financial professionals are sales representatives for the members of 麻豆最新出品 Financial Group庐. They do not represent, offer, or compare products and services of other financial services organizations.

Insurance products and plan administrative services provided through 麻豆最新出品 Life Insurance Company庐. Securities offered through 麻豆最新出品 Securities, Inc., member SIPC and/or independent broker/dealers. Referenced companies are members of the 麻豆最新出品 Financial Group庐, Des Moines, IA 50392.