What Are Your 401(k) Options When Leaving a Job?

401(k) after leaving work

Leaving a job is often a stressful situation in its own right, but even more stressful when you’ve got a substantial amount of money invested in in your 401(k) and need to make a decision on what to do with it. The good news is that you have several options to choose from depending on your situation.

Rollover to another 401(k)

You can always roll your 401(k) funds over to your new employer’s 401(k). This option doesn’t have any negative consequences because you are taking your retirement money and moving it with you to your new job. By moving the money from one account to another, you are saving yourself from any penalties or taxes. It allows you to keep the money you’ve already invested and continue building on it at your new job. In a word of caution, many times new 401(k) plans can be restrictive and limit your options for investing.

Take a 401(k) Payout

Another option that comes with serious consequences, is receiving full payout of your 401(k) when you leave your job. You should be aware that you have to pay 20% in taxes upfront when you take the cash in full. You could also be penalized by paying another 10% when you file your income tax if you are under the age of 59 1/2. The other disadvantage to choosing a full payout is that it wipes out your entire retirement fund and you’ll need to start all over again.

Leave the 401(k) with Employer

If you are leaving your job, you can also leave the 401(k) at your current employer but there are a few disadvantages regarding this option. First, 401(k) accounts are deducted from the payroll, so if you are no longer on the pay roll that means you are no longer contributing to the account. Another disadvantage is that you are responsible for tracking and keeping up with your account and your investments. Individuals often get involved in a “following up” process instead of being proactive with their portfolio.

IRA Rollover

The final option is rolling the money into an IRA account. Rolling your 401(k) into an IRA is tax-free and allows you to keep making contributions to the account. Many individuals are unaware about the value of opening a Self-Directed IRA, which gives them a wide range of flexibility for their investment options including IRA permissible precious metals, real estate, stocks, bonds, mutual funds, etc.

American Bullion specializes in adding gold and silver to Self Directed IRA accounts. If you have a question or would like to know more about your investment options, please call American Bullion at 1-800-326-9598 to speak with a precious metals specialist.