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Financial considerations when making a job transition

If you're moving to another employer, you have some big decisions to make. Should you take your old employer's retirement plan money with you? Which benefit options should you choose? How will your job change impact your financial situation? These are just a few of the questions you'll need to consider.

Make an informed decision about your retirement savings

Deciding what to do with your retirement savings may not be your first consideration, but it is important. The vested balance in your employer's qualified 401(k) or 403(b) retirement plan is yours to keep.

However, this brings up the question: Should I leave my dollars in my former employer's plan, take cash, roll over my 401(k) or 403(b) money into an Individual Retirement Account (IRA) or move it to my new employer's retirement plan?

You have a number of options, each with different factors to consider. The following offers an overview of some things to consider, however, you may want to discuss your decision with a financial advisor, who can take into account your specific situation and cover all of the pluses and minuses. Rolling the money to an IRA may not be the best option for everyone.

Roll savings into an IRA Leave savings in former employer's plan Transfer savings to new employer plan Take cash
Offers more investment options than employer plans do Limits your investment choices to those your employer provides Limits investment choices to those your employer provides Subjects your savings to significant tax and early-withdrawal penalties
Keeps your retirement assets consolidated in one account, which is easier to track Requires managing multiple accounts if you switch jobs again May be subject to income tax and early IRS withdrawal penalties if funds are not rolled into the new plan in a timely manner Can jeopardize achieving goals, including retirement
Maintains your tax-deferred growth potential Provides the easiest option Maintains your tax-deferred growth potential  
Fees may be higher Maintains your tax-deferred growth potential Consolidates your employer plan's retirement assets into a new account  

Be sure you understand the pros and cons of an IRA rollover before implementing. As with any decision that has tax implication, you should consult with your tax advisor prior to implementing an IRA rollover.

Other financial planning considerations when changing jobs

Along with what to do with your retirement savings, there are other decisions you'll need to make when you change jobs. A financial advisor can help you address some of these questions:

  • Do you understand your new benefits package and options, including health care, life, long-term care, and disability income insurance? Will you need additional insurance?
  • Have you determined how your job change might affect existing employee stock options?
  • How might your income and expense changes impact your future financial goals?