Retirement planning is an important financial matter that everyone needs to consider. Unfortunately, many people have placed their retirement planning on autopilot. They contribute to their 401(k) account through their employer and forget about it. They do not consider other forms of retirement planning until they leave their company and are forced to choose what to do with their 401(k) account.

You might assume that your only options are to cash out your account or roll it over into your new employer’s retirement plan. However, cashing out your 401(k) account before you reach retirement age can result in a significant penalty and tax liability. You can avoid a penalty and tax liability by rolling over your 401(k) account to your new employer’s retirement plan, but is that the best choice for you?

Benefits of Rolling Over a 401(k) Account to a New Employer Retirement Account?

When you roll over your retirement fund when changing employers, you avoid penalties and taxes. You also continue to accumulate money for retirement on a tax-deferred basis. Depending on your new employer’s retirement plan, your employer may contribute money to your account.

However, before you roll over your account, you need to review the information for your new employer’s retirement plan. Retirement plans vary. Your new employer may set different rules for the 401(k) account, such as no loans or distributions from the account other than for very specific and narrowly defined hardship withdrawals. The funds you roll into the account may not be subject to the rules for future funds, but it is something you should verify before deciding to roll over funds to a new employer’s retirement account.

Are There Other Options?

Yes, you have a variety of options in addition to a lump-sum distribution or rollover to a new 401(k) account.

For instance, you may be able to leave your funds in your current 401(k) account. If you are pleased with how the administrator has managed the account and you are near retirement age, this option might be advisable. Again, rules for 401(k) accounts can change when you leave the company, so always make sure you understand fully how much control you exercise over the account.

Rolling over 401(k) funds to an Individual Retirement Account (IRA) avoids penalties and tax liabilities. If you choose a Roth IRA, the taxable portion of the 401(k) distribution is included as income for the tax year.

There are many other options for investing money from your 401(k) account. Some of those options may or may not be beneficial or wise.

Consult a Financial Advisor About Your Retirement Funds

Before deciding what to do with your 401(k) after leaving a job, consult an experienced financial advisor. Each option you have has various advantages and disadvantages. The only way to decide which option is best for you is to weigh the pros and cons of each option.

Unfortunately, you could spend hours researching all available retirement accounts and options available to you. Some of the rules governing retirement accounts are complicated.

A financial advisor understands the regulations and laws governing retirement accounts and retirement plans. An advisor can explain the various options and help you develop a strategy that maximizes your retirement savings now and in the future.

Contact Castle Wealth Group for More Information

The financial advisors of Castle Wealth Group can review your options for your retirement plan. We offer a full range of financial planning services to help you plan for your future and your family’s future.

Call (844) 885-4200 to schedule a consultation with an experienced financial advisor.