Life happens. We change jobs, start a new career, or retire. If you have a 401(k) with your old employer, you will have to decide what do with that 401(k) account or other company retirement plan. There are some considerations that come into play like potential taxes, investment options, fees, and retirement strategy. Here are some options and considerations.
- You can cash out of your 401(k), in which case the funds would be taxed as ordinary income. However, cashing out of an old 401(k) will cause you to lose the tax-deferred benefits of the account and you could pay additional tax penalties depending on your age and circumstances.
- You can roll it into a new 401(k) at a new job. A rollover might be a good choice if your new 401(k) has particularly low fees or unique investment options. But, you will want to do your research about the investment choices or the fees you’ll have to pay with the new 401(k) plan.
- You can continue with the old 401(k). Continuing with your old 401(k) means leaving it with your former company, which can come with downsides. Your old company can make changes to plan administration and recordkeeping, as well as your investment options. However, if you are over 55 in the year you separate service, you usually can begin withdrawing from a 401(k) without the ten-percent early withdrawal penalty.
- You can roll the old 401(k) into an IRA. Rolling your 401(k) into an IRA can potentially mean access to more investment options and greater control over your investments. It could also mean lower investment fees, and less complication if you have one IRA as opposed to multiple 401(k)s.
There are all kinds of changes that happen later in life and leaving a job where you have a 401(k) or similar retirement account is one of them. Before making a big financial move with your 401(k) if you are leaving a job or retiring, consider how it could affect your tax situation and your investment options. You’ve worked hard and deserve to keep more of your retirement income.
Investment advice is offered through APO Financial Services, LLC (“APO”) 10155 Westmoor Drive, Suite 175, Westminster, Colorado 80021-2627. APO Financial Services is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration with the SEC as an investment adviser should not be construed to imply that the SEC has approved or endorsed qualifications or the services Eric Scott Financial and/or APO Financial Services offers, or that its personnel possess a particular level of skill, expertise or training. Additional information pertaining to APO’s registration status, its business operations, services and fees, and its current written disclosure statement is available on the SECs Investment Adviser public website at https://apofinancial.com/disclosure/.