Recently, it’s been reported that over 4 million Americans have left their employers to either take a new position, retire, take care of someone, or simply leave the workforce. If you are one of these folks, or if you are considering leaving your current employer, here are a few considerations to help you weigh your options.

Let’s talk about your retirement funds first. If you were participating in a retirement plan at your old job, you will have ownership of the “vested” funds in that account. Depending on the type of plan and the rules that govern the plan, you should have control of at least the amount you contributed as well as possibly the funds “matched” or provided by your past employer. The rules vary by employer, so it’s a good idea to ask your HR department about your plan’s rules and what your vested amount is.

It’s typical that an employer’s plan, such as a 401k, will not require a former employee to move the funds out of the plan. It’s often your choice to leave the funds in the plan or to transfer them to a similar type of retirement account, either with the new employer or in your own name, such as an IRA. Transferring from one qualified account to another can preserve the tax advantages of your money.  

You can also take the funds in cash as a distribution. However, there can be significant tax consequences to this. More importantly, in my opinion, you forfeit the strength in your long-term retirement assets to access cash today. Funds in a 401(k), 403(b), IRA, and other qualified accounts are best left to grow for your retirement over the long term. Taking money out of these plans before retirement, especially if you incur IRS penalties for early withdrawal, can be extremely expensive and detrimental to your long-term goals.

I encourage you to take an active role in managing these accounts, as proper stewardship of these funds can add tremendous financial strength to your finances. Maintaining the tax advantages, exercising good investment discipline, and maximizing your choices with your former employer funds can help you and your family.

In next month’s newsletter, I’ll continue discussing other considerations when changing jobs. 

In the meantime, please reach out to me if you have any questions or if I can provide any assistance.

Regards,

Shadowridge Asset Management, LLC does not offer tax planning or legal services, but may provide references to accounting, tax services or legal providers. They may also work with your attorney or independent tax or legal advisor.