December 01st - 3 minutes to read

What Happens to Your Retirement Account When You Change Jobs?

Wondering what to do with your 401k when you switch jobs? Consider these four options.

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Changing jobs raises many questions, particularly around one’s finances. One of the most common queries we hear is: What happens to your retirement account when you change jobs? Your retirement account reflects all your hard work, dedication, and future opportunities, so you’ll need to be able to navigate this critical process.

4 Things You Can Do With Your 401k When Switching Jobs

When switching jobs, it’s important to think proactively about your retirement plan. While you have several options for your money, you should be time-conscious as some investment options have timeframes that need to be followed, like the 60-day rule for rollovers. Here are four popular ones to consider.

1. Leave it Where it Is

Depending on your circumstances, you may be able to leave the money in your old employer’s plan. However, starting in 2024, plan sponsors will be allowed to force out former employees with vested account balances of $7,000 or less, which is a change from the previous $5,000 limit.

Leaving your money in your former employer’s account may be a convenient option. Still, it’s important to take into account the amount of money in the account, any associated fees, and whether it includes publicly traded stock. Additionally, you should consider the likelihood of losing track of the account, as many Americans tend to forget about their old retirement funds.

2. Roll It Over To a New 401k

Your new employer will likely offer you a new 401k account. If it allows rollovers, you can move the money from your old account into the new one. Remember, though, that most employers require you to be employed for a specific period before you can enroll. However, the rollover process is relatively straightforward once your new account is active and ready to receive contributions.

3. Roll It Over Into an IRA

Individual retirement accounts (IRAs) are a popular choice for many as they allow access to a broader range of investment opportunities. They also allow you greater control over your savings since you’re not under an employer’s plan. To roll a 401k into an IRA, you’ll first need to decide which type is best for you: a Roth IRA or Traditional IRA.

4. Cash it Out

If you aren’t happy with any of the investment options available to you, you can also choose to cash out your old account. However, while immediate access to your retirement savings sounds nice, cashing out your 401k is typically discouraged by most tax advisors and financial professionals. Cashing out and choosing not to reinvest the money could result in taxation, diminished sayings, and early withdrawal penalties (if under age 59 ½).

Retirement Planning Experts in Lancaster, OH

Want to maximize your retirement planning efforts? Royal Oak Financial Group has a team of financial advisors ready to help you make informed decisions about your finances. Contact us today to start planning for your future.