A Guide to Benefits When Changing Jobs

Qualified retirement plans.

  • Leave the funds in your current employer’s plan if your vested balance exceeds $5,000. If the balance is less than $5,000, the plan could require that you roll over or distribute your assets.
  • Roll over the funds to an individual IRA or, if allowed, to your new employer’s plan.
  • Withdraw the funds and pay any taxes due along with any applicable penalties. (It’s wise to carefully consider any decision to withdraw and spend your retirement savings.)

Accumulation rights.

Potential penalties and fees.

Rolling funds over to an IRA.

  • IRAs may provide more investment choices than employer plans.
  • IRA assets can be allocated to different IRAs. There is no limit on how many direct transfers you can make from one of your IRAs to another IRA in a year. This means you can easily move money between IRAs if you’re dissatisfied with an account’s performance or administration.
  • Although 401(k) distribution options depend on the plan terms, IRAs offer more flexibility.
  • IRAs have more premature penalty exceptions than 401(k) plans.
  • When you turn 72, you must start taking required minimum distributions (RMDs) from pretax IRAs, whereas you may be able to defer them in a 401(k) until the year you retire if your employer allows for it. (There are no RMDs from Roth IRAs during the account owner’s lifetime.)
  • IRA account expenses, such as trading charges or annual fees, may be higher than qualified retirement plans.
  • When you roll funds over from a 401(k) to a Roth IRA, taxes will need to be paid on the pretax contributions; however, any future distributions from the Roth IRA may be tax free if IRS requirements are met.

Rolling funds over to your new employer’s plan.

  • If you intend to work beyond age 72, participation in the employer’s qualified plan means you can typically delay the first RMD until the year you retire if the plan allows. (An exception applies if you own 5% or more of the business offering the plan.)
  • Employer 401(k) plans may receive greater creditor protection than IRAs. Typically, employer plan funds cannot be used to satisfy most creditors, while the federal protection for IRA funds is more limited.

Stock options and nonqualified deferred compensation plans.

Life insurance and disability insurance.

Health insurance.

New benefits review.

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