What Happens to My Retirement Plan Assets When I Leave a Company?

What Happens to My Retirement Plan Assets When I Leave a Company?

June 22, 2023

How you choose to handle your retirement plan assets when you change jobs will have a lasting impact on the size of your nest egg and ultimately on the type of retirement you can enjoy.

When you leave a company, you generally have four options for handling the money in your retirement plan:

  1. Leave the money in the plan. You can leave your money in the plan as long as your account balance is above $5,000. Your retirement balance will continue to grow tax-deferred, and you will have access to participant services, including website, phone, and quarterly statements in the mail.
  2. Transfer the money to your new employer’s plan. If you are going to another employer, check with their HR, as each plan has its own rules for what assets it will accept.
  3. Take the money as cash. The downside is that you’ll pay substantial federal and state taxes, in addition to a 10% penalty tax if you’re under age 59½...not to mention putting your future retirement needs at risk.
  4. Roll over the money into an individual retirement account (IRA). With an IRA tax benefits are preserved (i.e., taxes on your earnings are deferred until withdrawals taken at retirement).

Contact me at (804) 665-1589 or kmurphy@capfs.com for more information, or if you have any questions.

Before rolling assets over from a qualified plan, you should consider various factors. These factors include but are not limited to the following: Investment Choices, Fees and Expenses, Services provided by new option, Penalty-Free withdrawals, Required Minimum Distributions, and Tax considerations. Speak to a tax professional about your individual situation before taking any action.