Contributed by William Bevins, CTFA at Cypress Capital (Franklin, TN)
One of the most important decisions we face during our working years is choosing how to manage our retirement funds when we change employers. For many, losing a job is a fact of life. Currently, 44 million American workers have been displaced. Others leave their jobs on their own free will while some are lucky enough to retire altogether.
Most employees use employer-provided retirement plans to build their nest egg. These plans are most likely a 401(k), 403(b), or 457(b).
How to Handle Retirement Accounts After Leaving a Job?
If you are leaving (or have left) your employer, you have four options regarding how your retirement funds will be handled going forward:
- Leave your assets within your former employer’s plan.
- Move your assets directly to your new employer’s plan.
- Take possession of your assets and pay the required taxes.
- Roll over your assets into an Individual Retirement Account (IRA).
Each of these choices has its pros and cons but ultimately depend on your personal circumstances. I recommend individuals consider elements such as fees and expenses, investment choices, and flexibility offered.
I also recommend working with an experienced Registered Investment Advisor, such as myself, to help with these very important decisions. RIAs are independent and unbiased and – most importantly – work specifically for you. Let’s take a closer look at what it might look like to pursue these four options…
1) Leaving your assets within your former employer’s plan.
This option requires little work on your part initially. Over time, however, it could become overwhelming to keep up with more than one account at more than one employer – especially from an investment management standpoint.
2) Moving your assets to your new employer’s plan.
I recommend a thorough review of the new employer’s plan before transferring funds over. Make sure the plan has a healthy amount of investment options and that the underlying fees are in check.
3) Taking possession of your assets and paying the required taxes.
Before choosing this option, I recommend speaking with a qualified tax professional. Preventing surprises in the form of unexpected taxes or penalties is a good idea before taking a cash distribution. The tax penalties for early withdrawal can be steep.
4) Rolling over your assets to an Individual Retirement Account (IRA).
For many, this option offers the most flexibility and control over retirement assets. I find that associated fees tend to be much lower within an IRA. An IRA may also permit a more diverse set of asset classes, including real estate, precious metals, businesses, promissory notes, and more.
Finally, there are temporary changes to retirement plan rules for 2020 via the CARES Act. I am happy to discuss these in detail for prospective, new clients.
How Can I Help You?
If you’re not currently working with an advisor or if you’ve lost contact with your current one, let’s start a conversation. Contact me at [email protected] or by calling (615) 469-7348. For more information and to view some sample portfolio models, visit https://www.williambevins.com.
William Bevins is a Registered Investment Advisor with the SEC. Mr Bevins began his Advising career in 1995 and has spent 18 years as a Professional Equities Trader. Today his firm, Cypress Capital located in downtown Franklin Tn, manages $260 million from Individuals, Small to Medium Size Businesses, Pensions, and Charities. For more information please visit http://www.williambevins.com.
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