Travis Financial Services–

When you change jobs, what happens to your retirement plan?

When you change jobs, what happens to your retirement plan?

It’s not unusual to change jobs multiple times in a career. When you leave a job with a retirement plan, you have an important decision to make about what happens to that old plan. The right decision can help grow that money into a bigger source of income in retirement.

Depending on the plan, you may have options for your contributions and the vested portion from your old employer. Your options might include:

Leave your money where it is

Some plans allow you to leave your savings in the old retirement plan to continue to grow, though you’re no longer with the company. The upsides are maintaining control of how the money is invested, and not needing to do anything with it right away (changing jobs or starting retirement are busy times!). Annual required minimum distributions typically start after age 70½. The disadvantages of leaving your money in the old plan might be special conditions or fees that apply when you’re no longer with the company, or withdrawal restrictions later.

Move (“roll over”) the money to another retirement account

If the money goes straight from one institution to another, it’s not subject to taxes or withdrawal fees. Depending on your new employer’s restrictions, you could roll the money into your new plan, conveniently collecting those retirement savings in one place. Be sure to study the details of your new employer's plan before choosing this option. Alternately, you could roll the money into an individual retirement account (IRA). (If you withdraw the money and deposit it yourself, you may be subject to a 10% additional tax, with another 10% taken out in taxes if you’re under 59½. However, if you take the distribution and roll over the entire amount into an IRA or a qualified employer plan within 60 days, you won’t be penalized).

Take a cash distribution

You could ask that the money be paid directly to you in a lump sum, or if you’re retiring, in installments. Your employer will withhold 20% of your distribution to put toward your federal income tax bill. You’ll be subject to income taxes if you choose this option, as well as a 10% additional tax–unless you're older than 59½.

Think carefully before making any decisions about the money in your retirement plan(s). Discuss it with your tax advisor, if you have one. And consider speaking with a financial consultant, such as the qualified professionals at Travis Financial Services. They can help you decide whether to keep your money in the previous plan, roll it into your new employer’s plan, take the money as cash, or roll it directly into an IRA. TFS also offers planning, investing, and account management.

Call 888-449-6030 today or visit a branch for more information or to schedule a complimentary consultation.

Travis Financial Services

 


This material was prepared for Travis Credit Union and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services.

If assistance is needed, the reader is advised to engage the services of a competent professional.

This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

 


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The financial consultants at Travis Financial Services are registered representatives with, and securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA / SIPC). Insurance products are offered through LPL or its licensed affiliates. Travis Credit Union and Travis Financial Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Travis Financial Services, and may also be employees of Travis Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Travis Credit Union or Travis Financial Services. Securities and insurance offered through LPL or its affiliates are:

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