What happens if I get fired or laid off?
Resist the temptation to cash out your retirement savings if you are fired or laid off from a job. Instead, roll over your money to a different retirement plan so that your savings can continue to grow tax free.
Losing a job is a stressful experience. Adding to the stress is the decision you’ll have to make about what to do with your 401(k). The good news is that retirement plans are portable. That means you can take your nest egg with you when you leave a job. Let’s look at the options available to you:
Transfer to your new company’s plan. When you start a new job, you can move the money from your previous employer to your new employer’s retirement savings plan (if they offer one). Not all plans accept rollovers, so you’ll need to check with your new employer.
Roll over your old plan to an IRA. You can move your retirement savings from a previous employer to an IRA without paying taxes or penalties.
Icon is an IRA and accepts rollovers. You need to first open an Icon account and then we can help you with the process of rolling over your funds.
Don’t cash out! Whatever you do, don’t cash out your savings, even if you think it’s a small amount. Not only will you have to pay taxes and an extra 10% early withdrawal penalty, but you will also lose out on your future saving.
* This hypothetical example assumes the following: (1) One annual $5,500 IRA contribution made on January 1 of the first year, (2) annual rate of return of 7%, and (3) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees, or inflation. If they did, amounts would be lower. Earnings and pretax (deductible) contributions from a traditional IRA are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax free, provided certain requirements are met. IRA distributions before age 50-1/2 may also be subject to a 10% penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market. Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for a 7% annual rate of return also come with risk of loss.