New job? Four choices for your existing 401(k)

Changing jobs and companies can be an exciting opportunity, but you have a choice to make. What will you do with the retirement savings you have accrued in your 401(k)? Consider these four choices:

  1. Withdraw the money and don’t reinvest it. This is usually the worst choice you can make. Generally, you’ll owe taxes on the distribution at ordinary income rates. (Special rules may apply if you own company stock in the plan.) Unless you’re over age 59½, you’ll pay a 10 percent penalty tax, too. More importantly, you’ll lose the opportunity for future tax-deferred growth of your retirement savings. And once you have the funds readily available, it’s all too easy to spend the money instead of saving for your retirement.
  2. Roll the money into an IRA. You can avoid immediate taxes and preserve the tax-favored status of your savings by rolling the money into an IRA. This option also gives you full control over how you invest the balances in the future. You have a 60-day window to complete the rollover from the time you close out your 401(k). However, you should always ask for a “trustee-to-trustee” rollover to avoid potential problems.
  3. Roll the balance into your new employer’s plan. If your new employer allows it, you can roll the balance into your new plan and invest it according to your new investment choices. However, there may be a waiting period before you can join your new plan.
  4. Leave the money in your old employer’s plan. You may be able to leave the balance in your old plan, at least temporarily. Then you can do a rollover to an IRA or a new plan later. Check with your employer to see if this is an option.

Call if you need help making the right choice for your particular circumstances.

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today's small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it. Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission. Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations. She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor and their dog, Davis.
This entry was posted in 401 k, Employee Benefits, employees, Estate, Filing Taxes, Financial Planning, invest, Investing, investment, IRA, IRS Articles, Tax, tax bill, tax planning, Tax Return, taxes, Uncategorized and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s