What to Do with Your Retirement Savings When You Change Jobs

Here are some thoughts from the great personal finance book Grow Your Money!: 101 Easy Tips to Plan, Save, and Invest. They give some thoughts on what to do with your retirement savings when you change jobs as follows:

• If you want to impair your future financial security...then cash out your retirement savings.

• If you like your former employer's plan...do nothing and leave the money with them.

• If you like your new employer's plan...move the funds into it.

• If you prefer to manage the money on your own or want more choice...rollover the money into an IRA.

Personally, I've always gone for the last option -- putting it into an IRA. Here's why:

1. It gives me control over the money (versus my former or current employer.)

2. I can invest it however I want (I'm not limited to the current and future choices in any specific plan.) For me, that means I can get the funds I want at the best prices possible.

3. Ease of management. I've had a few jobs and 401ks, and I've rolled them all over into the same IRA. So I have one retirement account, one statement, one account to manage, etc.

FYI, options #2 and #3 can also work, I just prefer the IRA for the reasons stated above. That said, option #1 is a very BAD idea and I would not recommend it unless you needed the money for an important emergency and there was absolutely no other alternative for getting it.

How about you? What have you done with your retirement when you've changed jobs?

Comments

[corey]

If you're like me and want to keep eating, you pick option #1.

[Travis]

My previous employer has an odd rule that I was 100% vested from day one but if I were to rollover the plan after leaving I would lose the contributions and considering they matched 2:1...I am leaving it with them.

[Money Progress]

That is very odd Travis...

Personally I rolled over my 401k into a Roth IRA. The money is taxed as income at that point but there are no additional penalties. The cool thing is that this actually allows you to contribute more than your normal limit to the Roth IRA for the year, which is very nice.

Anyways I think technically you have to roll it to a normal IRA and then you can move it to a Roth IRA if you are not above the income limits. So this is option #4 + new #5 :)