401k Changing Jobs – Your 401k provides you with several options as far as what to do with it when changing jobs-especially if the position is more lucrative than those in your past. However, don’t forget about your retirement account because it should go with you.
Never cash out the plan, even if your broker recommends doing so (not many would). Did you know that most people who cash out never resume their accounts? We sure see some strange behavior when it comes to money.
But that’s not the real reason. You will be hit with income taxes, plus a 10 percent penalty, if you’re under the age of 59. Once you cash out your 401(k), the IRS will be expecting their cut of the share.
In addition, you will also miss out on tax-deferred savings; so remember, never cash out your retirement plan. It’s the worst thing you can do.
There are three things you can do . . .
Just because you’re leaving one job for another doesn’t mean you can’t simply leave the account where it is. Who says you have to take it with you? If you are happy with the plan, leave it where it is.
Many financial experts would disagree with the decision to leave your account with your former employer. They suggest having your retirement funds in one account. If you do decide to roll it over, be sure to jump through all the hoops and finish all the paperwork between the two companies. Be prepared for red tape.
Most employers these days don’t offer a 401(k) program, so you’re lucky if you’ve found one. An IRA offers a lot of investment freedoms, and if that’s more appealing to you, then it’s your best option. You have plenty of choices when it comes to mutual funds. Visit any bank that offers the account and read up on it before speaking with an agent.