Moving to a new job? Here’s what you can do with your 401(k) account.

Pop the bubbly! You just landed the GOAT job and you’re basking in the excitement of your excellent career move. There’s a lot to celebrate (woohoo!) – but also a lot to decide (wah!). Topping the list of decisions: What should you do with the 401(k) account you’ve built up with your prior employer?

There are four main options to consider, with no one-size-fits-all answer. Here are the highlights of your options, which our Financial Advisors would love to discuss further with you!

1. Leave it where it’s at. The employer you’re leaving could allow you to keep your 401(k) account there, or could require you to take your money out when you depart. If given the choice, keeping it with your prior employer would be a simple choice in the short run because you don’t have to take any action. But in the long run, there are potential disadvantages: It can be a huge headache to keep track of multiple 401(k) accounts across prior employers, the plan’s fees may go up, and you may have limited flexibility on how you can take your money out in the future.

2. Bring it with you. Another option provided by your new employer may be to roll your prior 401(k) dollars into their plan. If given this choice, the major advantage would be consolidation. It is easier to keep track of one account versus multiple accounts, and fewer accounts may result in fewer plan fees. The downside, though, is limited investment flexibility -- you likely can’t take your money out until you retire or move to a different employer.

3. Move it to a Rollover IRA. A third option would be to work with a Think Financial Advisor to move your 401(k) funds into a Rollover Individual Retirement Account (IRA). An IRA provides you with a wider array of investment options, more accessibility to your account, and more flexibility in making changes to your plan than you’d have with an employer-sponsored 401(k) plan. (BONUS: You get experienced, customized advice from your Financial Advisor!) Going this route means you would still have at least two retirement accounts in two separate places, however - this IRA and your current employer’s 401(k).

4. Cash it out. You could cash out your 401(k) when you leave your employer, but make absolutely sure you are aware of the financial consequences before doing this. If you are not retirement age, you will pay a 10% penalty for withdrawing your money. (Yikes – this could be considered robbing your own retirement!) Plus, you should plan for a hefty tax bill at the end of the year.

You put yourself in a better professional position by landing a great new job. Call a Think Financial Advisor at 507-281-8429 for help putting yourself into a better financial situation and planning for retirement, too!
If you are considering rolling over money from an employer-sponsored plan, such as a 401(k) or 403(b), you may have the option of leaving the money in the current employer-sponsored plan or moving it into a new employer-sponsored plan. Benefits of leaving money in an employer-sponsored plan may include access to lower-cost institutional class shares; access to investment planning tools and other educational materials; the potential for penalty-free withdrawals starting at age 55; broader protection from creditors and legal judgments; and the ability to postpone required minimum distributions beyond age 72, under certain circumstances. If your employer-sponsored plan account holds significantly appreciated employer stock, you should carefully consider the negative tax implications of transferring the stock to an IRA against the risk of being overly concentrated in employer stock. You should also understand that Commonwealth and your financial advisor may earn commissions or advisory fees as a result of a rollover that may not otherwise be earned if you leave your plan assets in your old or a new employer-sponsored plan and that there may be account transfer, opening, and/or closing fees associated with a rollover. This list of considerations is not exhaustive. Your decision whether or not to roll over your assets from an employer-sponsored plan into an IRA should be discussed with your financial advisor and your tax professional.