When it comes to changing jobs, many people are hesitant because they aren’t sure what will happen to their retirement plan. There are several options available, so let’s talk about them.
401(k) & 403(b)
You have worked hard to contribute to your retirement plan, and you don’t want to lose that money or the momentum you’ve built up on securing your nest egg. So, what happens to it when you change jobs? Since there are several options, it’s important that you understand each one and review those options with your financial advisor. Let’s look at your options.
[Related: FIRE Retirement Virginia]
Keep Your Current Plan
First, if you are happy with the current investment options, you can keep your plan with your former employer. While it is convenient, we strongly encourage you to evaluate all options with your financial advisor. If you do choose to keep the plan, be sure to track it regularly, keep your beneficiaries updated and maintain a comprehensive financial picture of your retirement savings.
Transfer Your Retirement Plan
Another option is to transfer your savings into your new employer’s 401(k) plan. If the new employer offers investment options that support your financial goals, this could be the right option. It is easier to track one retirement account instead of several and the new employer may offer more benefits.
Individual IRA
Instead of transferring, you can roll your savings into a personal IRA. This means you become the owner of your retirement savings instead of just a participant in an employer-qualified plan. This option gives you much more control over risk levels, asset allocation and organization. Another benefit of an IRA over a traditional 401(k) is access to a greater variety of investment options.
Deferred Compensation Planning
Employers may, in some cases, withhold a fraction of employees’ compensation each month. It accumulates and is paid in a lump sum on a date that has been previously agreed upon. Some employers invest this amount into stock options or mutual funds, increasing the value of the payment due.
Changing jobs means that you may need to rethink your plan for funds from your deferred compensation. Should it go right into your IRA or 401(k) or is it better used elsewhere? Don’t forget that you will also have to pay taxes on this payout, so you need to plan accordingly. Your financial advisor will help you understand the implications and help you to make the best choices.
Investing Tips for 401(k) & 403(b)
Choosing the right investments is a crucial part of growing your retirement savings. These simple tips for investing should help you make the most of your retirement plan.
- Start contributing early.
- Maximize employer matching contributions.
- Diversify your portfolio.
- Increase savings rate when possible.
- Avoid premature withdrawals.
- Maintain and rebalance when necessary.
Retirement Plan Considerations for Changing Jobs
Changing jobs can be scary and may cause uncertainty, but it doesn’t have to be a drawback for your retirement plan. With the help of a financial advisor, you can use this opportunity to rebuild and rebalance your portfolio. For more information about the options above, please contact Argent Bridge Advisors.
