6 Things You Should Do With Your Retirement Accounts After Changing Jobs
Written by
Jordan Rosenfeld
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Molly Sullivan
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Many employers offer retirement account benefits to full-time employees, often with matching funds. These can be a fantastic way to help the average worker save for retirement. However, what happens if you change jobs?
The money in those accounts remains yours, but there may be steps you have to take to transfer the funds, as well as consider any penalties if you decide to cash them out.
Retirement experts offered tips on what to do with and about your retirement accounts after changing jobs.
Contact Your Former Employer’s HR Department
Most importantly, start by contacting your former employer’s human resources or benefits department to understand your options, according to Christopher Stroup, CFP and owner of Silicon Beach Financial.
“If you intend to rollover your old employer account, research and open an IRA or 401(k) with your new employer. You can manage this on your own, but a financial planner can help tailor your decision based on your overall retirement strategy,” he explained.
Determine Rollover Options
After changing jobs, you should immediately determine what rollover options are available for these accounts, according to Eric Coons, owner of Kaleidoscope Financial.
“From there, you will need to decide whether to transfer the savings to an IRA, your new employer’s plan or just leave it where it is at. You should meet with your financial advisor before making any decisions.”
Assess Your Proximity to Retirement
Your proximity to retirement also makes a difference in the choices you make, according to Stroup. If you’re closer to retirement, for example, you might prioritize stability and income generation over growth.
“You may wish to consider keeping your funds in your old employer’s plan or rolling them into a low-risk IRA. Ultimately, it’s important to assess the allocation of your portfolio during this period to ensure that you’re appropriately allocated to fund your retirement,” Stroup said.
Be Careful of Fees and Penalties
Immediate concerns include high fees or limited investment options should you leave your money with your former employer’s plan, Stroup said. You should also watch for any “hidden” fees that can eat into your balance, such as administration fees by the plan custodian.
Coons added that you want to be aware of “surrender charges or delays during the rollover process,” and ensure that the new account offers comparable or better benefits and aligns with your investment strategy.
Understand the Tax Implications
Rolling over retirement accounts into another qualified plan, like a 401(k) or IRA, is typically tax-free, Stroup said. However, if you take a distribution instead of rolling it over, it could be subject to income tax and early withdrawal penalties if you’re under age 59 1/2.
“Indirect rollovers must be completed within 60 days to prevent taxation and potential early withdrawal penalties if you’re under age 59 1/2,” Coons added.
Generally, you cannot roll over a Roth IRA or a non-qualified pension plan, such as a cash balance pension plan, directly into a new 401(k), Stroup pointed out. “If your old plan has a balance under a certain threshold, some employers might not accept rollovers.”
Consolidate Accounts
If you have multiple old accounts, consider consolidating them into a single IRA or 401(k) for easier management, Stroup advised.
“It’s important to double-check that you’re choosing investments that align with your long-term retirement goals,” he said.
As always, consulting with a financial planner can ensure that your retirement plan stays on track after a job change.
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