401(k) Decisions -- You Can Take It With You
If you are preparing to change jobs, do you know what your
choices are for managing your current employer's retirement plan? Although many people choose to take a cash distribution, there are other options that may benefit you more.
Taking a lump-sum distribution may trigger federal withholding
tax. Taking your money as a cash withdrawal also means that you'll no longer enjoy the potential benefits of tax deferral that a qualified retirement plan offers.
Depending on your circumstances, you may have several options that will allow you to maintain the tax-deferred status of
your retirement plan assets:
• Leave the money in your former employer's plan. Your
ormer employer must allow you to leave the money where it is as long as the balance exceeds $5,000. You'll no longer be able to contribute, but you can still decide how you're invested.
• Roll over to your new plan. By "rolling" to your new plan, you may avoid the taxes that could eat away at a cash distribution. Even if you're not immediately eligible to contribute, you may still be able to roll over the money right away.
• Roll over to an IRA. If your new employer doesn't offer a
retirement plan or you aren't yet eligible to participate, you might roll over the money directly to a traditional IRA. Experts advise against commingling your retirement plan assets with other IRAs you may have set up. Instead, consider opening a separate IRA account, known as a "conduit IRA," which may allow you to move the funds to a new employer's retirement
plan at a later date.
Research Your Options. If you plan to change jobs, don't just take the money and run. Since rules vary from company to company, find the time to explore your alternatives. If
you have specific questions about your retirement plan distribution options, contact your employer's
benefits coordinator or a qualified financial consultant.
Cornerstone Wealth Management
486 N.W. 2nd Ave.
Canby, OR 97013
Securities and advisory services offered
through LPL Financial, a registered investment
advisor. Member FINRA/SIPC.
The opinions voiced in this material are
for general information only and are not
intended to provide specific advice or recommendations
for any individual.