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401(k) Options If You Loose Your Job

Losing your job is always tough, but by choosing the right option, you can help make the most of your money and protect your retirement savings.

Rollover your 401(k) to an IRA

  • One big advantage of an IRA rollover is the continuation of the tax deferred treatment.
  • You may also have increased investment options with an IRA.
  • Simplification - Rolling over your plans from former employers to a single IRA reduces complexity.

Keep your savings in your former employers plan

  • If you lose your job, you will not be able to continue contributing to your 401(k).
  • It would be up to you to monitor your account regularly. When you no longer work there, you may not be notified of any changes that may be made to the 401(k).
  • You may have too much of your 401(k) funds invested in company stock. The problem with this is that you may have all your eggs in one basket.

Cashing out...

  • Typically, this is the most expensive and least recommended option because you'll generally have to pay income taxes and a 10% penalty on the amount you withdraw if you're younger than 59 1/2.
  • The CARES ACT has loosened some of these regulations.

**Before deciding whether to retain assets in a 401(k) or roll over to an IRA, be sure you understand the benefits and limitations of your available options and consider factors such as differences in investment-related expenses, plan or account fees, available investment options, distribution options, legal and creditor protections, the availability of loan provisions, tax treatment, possession of employer stock, and other concerns specific to your individual circumstances.**

If you, or someone you know, have lost your job, and would like to discuss these options as they pertain to you, please contact me.

Thank you!