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What should I do with my 401(k) when I change jobs?
You have several options. You can keep the money in your current plan or you can roll it over into a new retirement account. Each option has its advantages. We’ll help you figure out the right one for you.
Here are your options when changing jobs:
Leave your balance with the old plan. You can keep your money with your current 401(k) plan as long as your balance is at least $5,000. But you won’t be able to make contributions, and you are still subject to the plan’s rules and limited investment choices. This may be a good option if you’re between ages 55 and 59 ½ and you will need your retirement savings soon.
Roll over your old plan to your new employer’s 401(k) plan. This can be a good move if you are happy with the new plan’s investment choices and fees. Find out if your new employer’s plan accepts transfers; not all do.
Roll over your old plan to an Icon IRA. You can roll over your 401(k) into Icon. Be sure to do a direct rollover so that taxes are not withheld.
Cash out your 401(k). NOT RECOMMENDED! If you take a “lump-sum distribution,” you will have to pay income taxes on the money. You will also pay a 10% early withdrawal penalty if you’re under age 59 ½. Not only do you lose money, but you lose valuable time in building savings, and may never catch up.