Annuities, Retirement Planning

Changing Jobs…What Should I Do about my 401(k)/Retirement Plan?

Changing Jobs…What Should I Do about my 401(k)/Retirement Plan?

Should you move your 401(k) (or other retirement account) when leaving one company for another?  Should you move it to the new company?  What do they mean, move it to a Traditional IRA?

To those of us in the industry, these questions are simple to answer.  You may find that because of compliance, many articles and thoughts ride the fence on advising you in this area.  We personally do not see why this particular fence is up at all.  It needs to be torn down…lol.

Most 401(k)’s will offer you limited control and may have a little higher cost.  One of the main advantages of a 401(k) is the fact that the company matches a portion of your contributions.  Once that match is lost, this means it is about control/decision making and the amount of choices at your disposal.  For this reason, and the fact that your cost is probably higher inside the 401(k), you would most likely improve your position to move your assets.

When transferring a 401(k) out of your previous employer to another account, it is a good time to transfer it into an IRA.  If your 401(k) is a traditional 401(k), then it would go to a Traditional IRA.  This is done without any tax consequence when done properly.  If you were to withdraw the funds versus transferring, the entire amount would be taxable.  And you DO NOT want this.  If doing this without the help of a financial professional, be sure you check the correct boxes when transferring.

If some or all of your 401(k) funds are a Roth 401(k), then they would transfer to a Roth IRA.  And there is no tax consequence on this either as long as you do not withdraw the funds.

It is likely you have a lot going on when changing from one company to another.  So much has changed:  new relationships, new driving patterns, training on new systems and/or responsibilities, maybe different and even longer hours…the list goes on.  And something that seems cumbersome and even complex – financial planning decisions of any nature – is easy to push aside.  DO NOT WAIT!

Spend a little time with a professional.  The ability to take your retirement savings and gain complete control of them most likely places you in an incredible position to make some major shifts that could be huge to your retirement phase.  Many are trapped in their 401(k)’s right up until retirement or age 59 ½, limiting the impact of efficient planning for their retirement.  This new found ability to shift your philosophies before that time can easily provide a 20-40% improvement in income and/or legacy for your retirement assets.  We are not talking return.  We are talking overall improvement.  It can mean hundreds of thousands of dollars in many cases!  It is huge and well worth taking advantage of this new access to your cash during this transition.  In addition, a great planner with the ability to offer tax advice can get you the most from future contributions to your new 401(k).

This professional should be talking to you about future goals, not just moving your assets.  They should be talking to you about current and future contributions.   They should be looking at your latest income tax filings to help you discover what is best for these funds and future funds.  You can move the funds without addressing all of these issues…but DO NOT let time evaporate because of your new found busyness.  This is opportunity!

This opportunity is for you to look closely at what you really want and worth investing some of your time, not just your assets.  Beware that too many advisors speak to interest rate and fees alone.  You want someone who goes further and speaks to the entire picture and is not simply looking to add your assets to their revenue stream.  We assure you there is so much more than rate of return and fees.

Here is a list of some of the things you should check off to help you know if the person you choose is going the distance for you:

  1. Are they truly discussing future income goals during retirement?
  2. Are they discussing the power of Roth IRA’s and/or Roth 401(k)’s?
  3. Are they educating you on taxes during retirement – especially on your Social Security income?
  4. Are they showing you ways to have tax-free income during retirement (if all they discuss are municipal bonds, you should move on…)?
  5. Do they develop a well-written plan – not just an illustration (our plans typically have check points scheduled for 10-20 years out from date of implementation)?
  6. Are they using language you can understand?
  7. Does what they are suggesting give you a feeling that can only be described as peace of mind?

What does this last point mean?

This is your retirement future.  Are they going to supplement your income if the returns are too low?  NO!  LOL….  But of course, no one will.  Point being, this is your retirement – take charge and do not let the lingo or math intimidate you.  Most do get intimidated and when the person on the other side of the desk uses fancy terms, people assume they must know what they are doing.  And they probably do, but you want to be sure this person is willing to simplify things to help you understand, not impress you with the words and terms they use.  They should impress you with their ability to relate to you and help you walk away feeling “peace of mind”.

Andy Bowles

Retirement Income Planning Specialist @ Solutions 2 Retirement, LLC


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