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Deciding What to Do with Your 401(k) Plan When You Change Jobs

M Mazzochetti 2014
Mark S. Mazzochetti, CISP
Vice President, Retirement Services Officer
[email protected]
(585) 419-0670 x50606

When you change jobs, you need to decide what to do with the money in your 401(k) plan. Should you leave it where it is, or take it with you? Should you roll the money over into an IRA or into your new employer’s retirement plan? Recommended options are:

  • Leave the funds where they are
  • Roll over funds into a traditional or Roth IRA
  • Roll over funds into new employer plan

Which option is appropriate?

Is it better to leave your funds in a 401(k) plan (your current plan or a new employer’s plan) or roll them over into an IRA?

Each retirement savings vehicle has advantages and disadvantages. Here are some points to consider:

  • A traditional IRA can offer almost unlimited investment options; a 401(k) plan limits you to the investment options offered by the plan.
  • A 401(k) may offer a higher level of protection from creditors.
  • A 401(k) may allow you to borrow against the value of your account, depending on plan rules.
  • A 401(k) plan may allow penalty-free withdrawals if you leave your job at age 55 or later. Penalty-free withdrawals are generally not available from IRAs until age 59½.
  • You must take required minimum distributions from traditional IRAs once you reach age 70½. You generally don’t need to take required distributions from 401(k) plans until you retire.
  • Unlike Roth 401(k) accounts, you don’t need to take any lifetime required minimum distributions from Roth IRAs.
  • Employer stock may be eligible for more favorable tax treatment if distributed from a 401(k) plan rather than an IRA.
  • Both IRAs and 401(k) plans may involve investment related expenses or account fees. Also consider if plans offer services such as investment advice, education materials, and retirement planning. 

Finally, no matter which option you choose, you may want to discuss your particular situation with a tax professional (as well as your plan administrator) before deciding what to do with the funds in your 401(k).

Source: ©2015 Broadridge Investor Communication Solutions, Inc. This material provided by Mark Mazzochetti, CISP.

This material is provided for general information purposes only. Investments and insurance products are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please consult your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.