If you’ve recently changed jobs or are about to, figuring out what to do with your 401(k) can be an important decision. Your retirement savings represent years of hard work, and making the right move now can help protect your future. There are several ways to handle your 401(k), and each option has benefits and potential drawbacks.

William Bevins helps individuals make informed financial decisions. Contact him today if you need professional guidance on your 401(k) options when changing jobs—call (615) 469-7348 or email billbevins@cypresscapital to discuss your best course of action.

Understanding Your 401(k) Options When Changing Jobs

Leaving a job means many changes, and one of the most critical is deciding what to do with your 401(k). The good news is that you have options. Below, the choices are outlined so you can determine what works best for your financial future.

1. Keep Your 401(k) with Your Previous Employer

Some companies allow former employees to keep their 401(k) accounts even after they leave. This option requires little effort but may not always be the best choice.

Pros:

  • No immediate action is required
  • Your savings continue to grow tax-deferred
  • Familiarity with your current investment options

Cons:

  • No further contributions can be made
  • Some plans charge maintenance fees for inactive accounts
  • Managing multiple retirement accounts can become complicated

If your former employer’s plan offers solid investment options and reasonable fees, keeping your account there could be a practical move. However, consolidating retirement funds is often a better strategy.

2. Transfer Your 401(k) to Your New Employer’s Plan

If your new company offers a 401(k), you may be able to transfer your previous balance into the new plan. This keeps all your retirement savings in one place, making it easier to track and manage.

Pros:

  • Keeps all retirement funds together
  • Maintains tax-deferred status
  • Allows continued contributions under the new plan

Cons:

  • Your new employer’s plan may have limited investment choices
  • Some companies require a waiting period before new employees can enroll

Before making this decision, compare both plans' investment options and fees. If your new employer’s 401(k) is well-structured, rolling over could be wise.

3. Roll Over Your 401(k) to an IRA

Rolling over your 401(k) into an Individual Retirement Account (IRA) can provide greater flexibility and control over your investments.

Pros:

  • More investment options than most 401(k) plans
  • Lower fees, in many cases
  • Potential for a Roth IRA conversion

Cons:

  • Requires setting up an IRA if you don’t already have one
  • Managing investments becomes your responsibility

You can roll your savings into a traditional IRA to maintain the tax-deferred benefits or convert it into a Roth IRA, which requires paying taxes upfront but allows tax-free retirement withdrawal. William Bevins can help evaluate which approach best suits your situation.

4. Cash Out Your 401(k) – The Least Recommended Option

Cashing out your 401(k) may be tempting, but it’s usually not the best financial decision. Early withdrawals come with penalties and taxes that can significantly reduce your savings.

Pros:

  • Immediate access to funds

Cons:

  • Subject to income taxes
  • 10% early withdrawal penalty if under age 59½
  • Loss of long-term retirement growth

Consider alternatives that allow your savings to grow unless you have an urgent financial need.

Factors to Consider Before Making a Decision

Investment Choices and Fees

Every 401(k) plan has different investment options and fee structures. Before deciding, compare the performance and costs associated with your current plan, your new employer’s plan, and an IRA.

How Close You Are to Retirement

Stability and lower-risk investments may be a priority if you're nearing retirement. Younger professionals may benefit from higher-risk, higher-reward strategies. William Bevins can help you evaluate the best approach based on your timeline.

Employer Contributions

If your new employer offers a 401(k) match, rolling over could allow you to take advantage of additional contributions to help your savings grow faster.

Financial Flexibility

IRAs offer more withdrawal options for qualified expenses, such as first-time home purchases and education costs. If flexibility is essential, rolling into an IRA might be the right move.

Why Work with a Financial Planner?

Deciding what to do with your 401(k) isn’t always straightforward. A professional financial planner can help by:

  • Comparing the pros and cons of each option
  • Assessing tax implications
  • Reviewing investment choices and potential risks
  • Creating a long-term strategy that aligns with your retirement goals

William Bevins is a qualified financial planner helping individuals manage 401(k) options when changing jobs. If you need guidance, reach out today for a consultation.

Get Professional Advice Today

Making the right decision about your 401(k) now can have a lasting impact on your financial future. Whether you’re considering a rollover, keeping your funds where they are, or exploring other options, expert advice can help you make an informed choice.

For personalized financial guidance, contact William Bevins at (615) 469-7348 or email billbevins@cypresscapital today. Let’s work together to secure your financial future.