You’ve had some cake, said your goodbyes, and are on your way out the office door for the last time. Yes, that switch from one job to another can be an emotional time. You are focused on a million different things at once, trying to ensure that is all goes smoothly. You can be forgiven then, for neglecting to consider your 401(k) and the impact that the switch will have on it. Luckily, this article takes a moment to discuss some of the important considerations you should make regarding your 401(k) when switching to a new job.
1. The employer match
When you began your employment at your previous job, you were likely told about the exciting employer match that they offered on your 401(k) contributions. Though matching schemes such as these can be a huge help towards your retirement goals, it is vital to ensure that you know your vesting schedule prior to departing your employer. You may only be entitled to keep a portion (or in some cases none) of the employer match in the 401(k) if you did not work there for long enough. However, you will still be entitled to keep any interest earned on it.
2. Rolling the 401(k) into your new employer’s plan
If you new employer also offers a 401(k) plan, it should be relatively straightforward to simply roll your funds over from your old account into a new one. You will want to speak with the administrator at your new company to see how best to accomplish this. They may ask you to instead speak with someone at the financial institution that manages the 401(k).
3. Rolling the 401(k) into an IRA
If your new employer does not offer a 401(k) plan, you should strongly consider rolling your retirement funds into an IRA (Individual Retirement Account). This fund will be set up by you and will be in no way associated with your old or new company. IRAs will usually have lower fees and offer a greater choice of funds to invest in when compared with a 401(k). As such, it is rarely advisable to simply leave your 401(k) with your old employer – it should almost always be rolled over.
Whatever your reason for leaving your old job, it is always important to think of the future – particularly your retirement. By taking the time to consider your options, you can ensure that your road to retirement is as short and smooth as possible.