Changing jobs? A 3-step checklist for your 401(k)

Changing jobs can bring on a roller-coaster of emotions, but it’s also a great opportunity to review your overall retirement savings picture, including your 401(k). The first step is to take a deep breath. You have options.

Step 1: Research the benefits of IRAs

One option is to roll over your old 401(k) or other eligible retirement assets into an IRA. IRAs can offer flexibility so you can access a wide array of investments – including stocks, options, exchange-traded funds (ETFs), fixed income and mutual funds – as your plans for retirement evolve. A rollover, as opposed to taking a lump-sum distribution, generally allows eligible retirement assets to maintain their tax-advantaged status.^,

You can use an existing IRA or open a new IRA to roll over your 401(k). It’s important to note the different contributions that may be in your plan. Depending on your 401(k), a portion of your savings may be traditional (pre-tax), after-tax, Roth or a combination, and you may need to roll over to a compatible IRA account. A Roth conversion may be something to discuss with your tax professional as well.

If, over the years, you’ve ended up with multiple IRAs, 401(k)s or other retirement assets, you may also choose to consolidate your retirement assets in one or more IRAs with the same firm. This move can help you track your retirement savings more easily.

Step 2: Consider all your options

Other options may include staying in your former employer's plan, rolling over to your new employer's plan or taking a lump-sum distribution. Compare the pros and cons for each of these options. Consider which investments are available within each account, what fees you may have to pay and whether other factors apply, like the ability to borrow money from your 401(k) and the amount of access to (and the nature of) any advice.

Except for certain extenuating circumstances, taking a lump-sum distribution is often the option that can have the biggest tax impact. Issues with taking a lump-sum withdrawal may include being subject to an early withdrawal penalty and taxes. You can speak with a tax or legal professional about your options. Another consideration is that employers may cash out or automatically roll over a former employee’s 401(k) left in the employer’s plan with a balance under the plan’s minimum amount.

Step 3: Make a decision

Whatever you decide, don’t forget about your 401(k) or other retirement assets. Consolidating retirement assets into an IRA may make it easier to maintain a holistic view and help with planning for retirement. Some may not realize that leaving a 401(k) with a prior employer is one available option.

And if you do decide to roll over? Rolling over your 401(k) may be intimidating initially, but having a trusted partner can go a long way to help smooth the process. They may have tools that create a clear rollover experience with actionable next steps. Once you decide what to do, take action – caring about your savings journey is caring about your future.

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