Do you know your 401(k) options after leaving an employer?
Between high contribution limits, tax advantages, and potential employer matching, a 401(k) can be a home run for your retirement savings. But if you've moved on from your 401(k) employer or are planning a transition soon, do you feel prepared to handle your retirement plan?
Consider these options for managing your 401(k) savings after you leave your employer:
Keep your current 401(k)
Logistically, this is your easiest option. Unfortunately, some employers don't offer this once you've left. It's best to check with your HR department to understand what's available.
Rollover to a new 401(k)
If your new employer offers a 401(k) plan, you can likely rollover your existing plan. This will allow you to continue taking advantage of 401(k) benefits like employer matching and high-contribution limits. However, your investment options will be limited based on your new employer's plan.
Rollover to an IRA
If your current employer doesn't offer a 401(k), you could choose to roll your savings into an individual retirement savings (IRA) account. An IRA offers more flexibility and choice with your investments, but it does have a lower yearly contribution limit than a 401(k).
Withdraw your money
If you need extra cash today to cover expenses, you can choose to withdraw funds from your 401(k). Keep in mind that you will pay taxes on your contributions, plus a penalty for early withdrawal. While this might not be financially advantageous, it's still an option if you need cash immediately.
The Bottom Line: Navigating your 401(k) is just the tip of the iceberg in retirement planning—there's a whole world of strategies waiting to empower your future preparations. Just know I'm here to help you with all aspects, from 401(k) to tax management.
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Matt Faubion, CFP®
Founder - Wealth Manager