Have you ever wondered what to do with that employee retirement plan when moving on from an employer? Well, here are several options to consider....
OPTION 1: Leave it in the old employer’s plan. Sometimes this is the best option until you really know the merits of your new employer’s plan.
- Is this job a good fit and will I be staying here.
- My current investments in the old plan are low cost and performing well, I don’t want to make changes right now.
OPTION 2: Transfer your assets over to your new employer’s plan. Why might I do this?
- Investments in the new plan closer align to my overall goals.
- I have become disconnected from the old plan and pay less attention to the ongoing management of the assets.
- New plan provisions are more robust such as loan availability and hardship distributions.
- I just want to create a clean break from my former employer.
OPTION 3: Roll your assets over into an IRA. Why:
- This may give you the ultimate choice as to where your assets are invested. Qualified plans typically have a limited choice of investment options.
A drawback to this approach is that Qualified plans tend to have strong creditor protections for assets within the plan. IRA’s also have creditor protections as well, but limits can vary depending on State law.
OPTION 4: The least beneficial, but still a choice is to cash out. However, BEWARE. Should you choose this option….
- You will need to pay a 10% penalty if you are under age 59 ½ and ordinary income on the distribution.
- Employers may withhold 20% of your distribution to account for the taxes you will owe.
- The lost opportunity of how your assets could have grown over the years if you had left them in a retirement account can be significant.
If you have questions or need help figuring out your best options, consult with a financial planner. We are here to help, give us a call: 802-453-2378.