Changing jobs? What about your 401(k)?

Changing jobs? What about your 401(k)?

March 01, 2024

Have you or someone you know changed jobs recently? One of the questions we field the most is... "what do I do with my 401(k) now?" We wanted to take a minute to highlight some of the benefits of rolling over your 401(k) to an IRA account.

401(k) Rollover Description: A 401(k) rollover refers to the process of transferring funds from a former employer's retirement savings plan, such as a 401(k) or 403(b), into an Individual Retirement Account (IRA) or another employer's retirement plan. This movement of funds allows individuals to maintain the tax-advantaged status of their retirement savings while gaining more control over investment options and potentially consolidating multiple retirement accounts.

Benefits of a 401(k) Rollover:

Tax Advantages and Continuity:

  • By rolling over funds from a 401(k) into an IRA, individuals can maintain the tax-advantaged status of their retirement savings. This continuity helps to avoid immediate tax consequences, allowing the funds to continue growing tax-deferred until eventual withdrawals in retirement.

Expanded Investment Options:

  • 401(k) plans offered by employers often have a limited selection of investment options. With a rollover into an IRA, individuals gain access to a broader range of investment choices, including stocks, bonds, mutual funds, and other financial instruments. This increased flexibility empowers individuals to tailor their investment strategy to better align with their financial goals.

Consolidation and Simplification:

  • Rollovers provide an opportunity to consolidate multiple retirement accounts from different employers into a single account. This simplification not only makes it easier to manage and track retirement savings but also facilitates more effective financial planning. Consolidating accounts may lead to a clearer understanding of overall asset allocation and retirement readiness.

If you or someone has recently changed jobs and has questions on how to navigate this decision, please let us know!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

A plan participant leaving an employer typically has four options (and may engage in a combination of these options), each choice offering advantages and disadvantages. For balance, please update your material to include each option below:

• Leave the money in his/her former employer’s plan, if permitted;

• Roll over the assets to his/her new employer’s plan, if one is available and rollovers are permitted;

• Roll over to an IRA; or

• Cash out the account value.