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Make the Right Choice for Your 401(k)
WHAT TO DO WITH YOUR 401(K) WHEN YOU CHANGE EMPLOYERS
The government’s response to COVID-19 has left many suffering from varying degrees of financial hardship. For this reason, a common question we’ve received lately is, “What should I do with my 401(k)?” When you have a 401(k) but are switching employers, you’ll have to decide what you want to do with it. In all cases, you have four options. 1. Leave it in your former employer’s plan. If you do, you will no longer be able to contribute to or borrow from the plan. Your investment options will be limited by that employer’s plan, and your money will be subject to the stock market. There’s really no advantage to this option. 2. Roll it into your new employer’s plan. Some employers allow you to transfer your 401(k) from a former employer into their company’s plan. But just as above, your investment options will be limited by your new employer’s plan, and your money will be subject to the stock market. Again, there’s not much advantage to this option. 3. Cash it out. If you cash your 401(k), you could be subject to early withdrawal penalties, regardless of the reason for doing so. Sometimes the need for cash is greater than the cost of obtaining it, but remember: If you cash it out, you’ll be starting your retirement savings from zero, and you’ll have lost the time it took you to save that money.
4. Roll it over to an IRA. If you do a non-taxable rollover to an IRA, you’ll have access to a wider array of investment options. You can also protect your money from the inevitable losses that come from the stock market, while maintaining your ability to participate in gains. You’ll also have the opportunity to create retirement income you won’t outlive. When comparing your four options for your 401(k), the smartest choice is pretty obvious: Roll it over to an IRA. So if you have a 401(k) and find yourself changing employers, contact Principal Shield Financial so we can help you protect your money.
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