Changing Jobs
Leaving your job means you have the opportunity to take control of your retirement plan savings
What are your options?
If you have a retirement plan with a previous employer, you generally have four options.
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Pros |
Cons |
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- You pay no current taxes or penalties
- Your money can keep growing tax-deferred
- You can diversify your investments
- You gain maximum flexibility and control
- Your money is protected under federal bankruptcy law
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- You can't take a loan against an IRA
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Roll over to another employer's plan |
- You pay no current taxes or penalties
- Your money can keep growing tax-deferred
- You can potentially take a loan against your account savings
- Your money is protected under federal bankruptcy law
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- Your new employer may have a waiting period for new employees investing in their plan
- Your investment options may be limited
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Leave your money in your current plan |
- You owe no current taxes or penalties
- Your money can keep growing tax-deferred
- You continue to invest in the same funds
- Your money is protected under federal bankruptcy law
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- You generally can't take a loan against the plan
- Your investment options may be limited
- You may be involuntarily forced out if your balance is below $5,000
- Your former employer could change or terminate your plan
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Take the cash |
- You can use your money today
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- Your former employer will automatically withhold 20% to pay federal income taxes
- You will generally pay a 10% federal penalty if you are under 591/2 years of age
- You will pay all applicable state and local income taxes (up to 9.5%)
- You will forfeit compound earnings you need for retirement
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