RadioBDC Logo
Spinners | The Hold Steady Listen Live
 
 
< Back to front page Text size +

401(k) fund options when leaving a job

Posted by Pattie Hunt Sinacole  September 10, 2012 07:31 AM

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Q: I am planning to leave my job in late September. I am in the last final phase of a long interview process for a new step in my career. I am reluctant to ask my employer a very specific question. I think my question will tip them off that I am leaving my company.

My question is a 401(k) question. I have a significant balance in my 401(k) account and am fully vested in my employer’s contributions because I have been with this company for more than five years. What are my options? Do most exiting employees leave it in the former company’s plan because they don’t know enough about the new company’s plan?

A: The decision of what to do with the funds in your current 401(k ) plan is an important one. These funds are often a large portion of an employee’s retirement savings. When an employee leaves a job, there are typically four options: 1. leave the money in the previous employer’s plan, 2. roll the money into the new employer’ plan, 3. roll the funds into an IRA or 4. withdraw the balance.

According to Francesca E. Federico, Financial Advisor at The Bay Colony Group at Morgan Stanley Smith Barney LLC, most employees making a career change don’t typically leave their 401(k) funds with their former employer. Federico explains that you may be required to pay fee to remain in your former employer’s plan. Additionally, the investment choices might be limited.

Federico offers, “Many former employees will consider rolling the funds into their new retirement plan if they have immediate access and they believe the investment options are quality options with reasonable fees. I also see people rolling their 401(k) balances into an IRA. This gives them the freedom to choose from thousands of investment options, instead of the limited options available through a 401(k) plan.”

Lastly, Federico warns against withdrawing funds and “cashing out.” Fees and penalties may apply depending upon your age and tax situation.

Your 401(k) balance is likely a large part of your retirement portfolio. You are smart to take the time to explore what option best meets your financial goals.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

 

about this blog

From looking for a job to dealing with the one you have, our Job Docs are here to answer your employment-related questions.

e-mail your question

Name:
E-mail:
Your question/comment:

Meet the Jobs Docs

Patricia Hunt Sinacole is president of First Beacon Group LLC, a human resources consulting firm in Hopkinton. She works with clients across many industries including technology, biotech and medical devices, financial services, and healthcare, and has over 20 years of human resources experience.

Elaine Varelas is managing partner at Keystone Partners, a career management firm in Boston and serves on the board of Career Partners International.

Cindy Atoji Keene is a freelance journalist with more than 25 years experience. E-mail her directly here.

Peter Post is the author of "The Etiquette Advantage in Business." Email questions about business etiquette to him directly here.

Stu Coleman, a partner and general manager at WinterWyman, manages the firm's Financial Contracting division, and provides strategic staffing services to Boston-area organizations needing Accounting and Finance workforce solutions and contract talent.

Tracy Cashman is Senior Vice President and Partner of the Information Technology search division at WinterWyman. She has 20 years of experience partnering with clients in the Boston area to conduct technology searches in a wide variety of industries and technology.

Paul Hellman is the founder of Express Potential, which specializes in executive communication skills. He consults and speaks internationally on how to capture attention & influence others. Email him directly here.

archives