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3 Ways to Bring Your Retirement Savings to a New Job

3 Ways to Bring Your Retirement Savings to a New Job
 

It’s exciting to head out the door to a new job, but before you leave your old employer, make sure you have a plan to bring your hard-earned retirement savings along. Here are some options for cashing, keeping or transferring your 401(k) so you can make the most of your savings.

Cut and run

“The first thing I typically hear is, ‘What happens if I cash out?’” says Victor Rivera, Financial Advisor at SunTrust Investment Services, Inc. Client Advisory Center. 

Though tempting, cashing out will be wasteful, Rivera says. “You’re looking at a minimum of 20 percent withheld initially, as well as a small distribution fee, and other potential taxes and penalties.” Up to 40 percent of the 401(k) value could go up in smoke.

Stay with your old employer’s 401(k)

If your new employer is a smaller company, which may have higher fees attached to its program than larger employers, let sleeping funds lie, says Sev Meneshian, CFP president of Public Retirement Planners, LLC and an adjunct professor at Northwestern University in Evanston, Illinois. “If the old plan’s funds are okay and you’re comfortable with it, that’s an option if the plan sponsor allows you to stay.”

If your old plan is significantly better—for example, you like the way it’s structured—Rivera says it may be better not to move the funds. However, avoiding change or a little bit of paperwork isn’t a sound reason to keep your money with the old plan. “Inertia is not an investment strategy,” he says.

Fold into your new employer’s 401(k)

Rolling your retirement funds from one company plan to another—with some light paperwork—can be automatic and tax free, Meneshian says, but many people don’t realize that’s the case.

Be sure you understand how your money will be invested, and how much you’ll be paying—typically more than 1 percent and sometimes even more than 2 percent—in fees. “Plan sponsors have to disclose all the fees, but it can get very easy to forget what those are,” Meneshian says. “When you’re looking at a new plan, take a look at what the costs are. Do your digging around there.”

Compare the investment lineup with other options, Rivera adds. “You are limited to the choices within that plan.”.

Invest on your own with an IRA

Another option is to roll over your old 401(k) into an IRA, which allows individuals to pursue a wider range of funds, Meneshian says. But taking control of your finances means owning the liability, as well. “You have to be savvy and consult a tax person who really knows what they’re doing if you are withdrawing or converting to an IRA,” he says.

Take charge of your retirement

To Rivera, investing in retirement is like driving a car on the freeway: If you cash out, you’re moving in reverse, and if your money is in an employer’s 401(k), you’re a passenger in a carpool. “Some people are comfortable with that,” he says. “But if you roll over to an IRA, you’re driving that car.”

The best advice, Meneshian says, you’ve heard before: “Put away as much as you can, as early as possible, and don’t spend more than you’re making.” And work with a professional if you need help. 

“People are so hesitant to seek professional advice about retirement,” Rivera says. “There’s nothing wrong with talking about what to do. It’s your money; you earned it. You deserve to be responsible for it.”

For help with retirement and investing planning:

Call the SunTrust Investment Services Client Advisory Center at 844.206.8900 or learn more online.

Note: Center hours are 8-6 ET, Monday through Friday

When it comes to rolling over savings from an employer-sponsored plan you have options. Before transferring your retirement assets be sure to consider investment options and services, fees and expenses, withdrawal options, required minimum distributions, and tax treatment of each option and how they align with your financial needs and retirement plans.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

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