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If you've lost your job, or are changing jobs, know what to do with your 401(k) retirement plan.
Tax planning for income
The health of Social Security
How much Social Security will I receive?
If you leave your job, you’ll be entitled to a distribution of your vested balance. Your vested balance always includes your own contributions, and typically investment earnings on those amounts.
It also includes employer contributions and earnings. Check with your plan to understand your vesting schedule.
While this pool of dollars may look attractive, don’t spend it unless you absolutely need to. If you take a distribution, you’ll be taxed at ordinary income tax rates, on the entire value of your account, except for any after-tax or Roth 401(k) contributions you’ve made.
And, if you’re not yet age 55, an additional 10 percent penalty may apply.
In general, if you have an outstanding plan loan, you’ll need to pay it back, or the outstanding balance will be taxed as if it had been distributed to you in cash.
If you can’t pay the loan back before you leave, you’ll still have 60 days to roll over the amount that’s been treated as a distribution to your IRA. Of course, you’ll need to come up with the dollars from other sources.
Assuming both options are available to you, there’s no right or wrong answer to this question. You need to weigh all the factors, and decide based on your own priorities.
The decision to roll over to your new employer’s plan or to an IRA may have significant consequences both now and in the future.
As a member of Arsenal Credit Union you have access to David Weis, our knowledgeable Financial Advisor available through our broker-dealer CUSO Financial Services, LP (CFS)*.
Set up a no-cost, no-obligation appointment today! If you have questions, please call David at 314.919.1058, email him at firstname.lastname@example.org or visit his website.
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*Non-deposit investment products and services are offered through CUSO Financial Services, L..P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.