Retirement Plan Consulting

Changing jobs is always difficult especially when you have a retirement savings plan like the 401K plan. When changing careers before the age of 59 1/2 you need to follow some specific guidelines to prevent losing a large amount of money from your retirement plan. Many people are not certain about how to manage a 401K plan after a job change. Changing jobs can bring uncertainty, but many people worry about what will happen to their retirement savings after the change.

By taking money from a 401(K) plan you are actually losing a large amount of money. Although it might not seem like you are taking a lot of money from the plan even by taking a small amount you could be risking losing money on what could have been made if it had been left tax free till retirement.

While it is good to leave money in the retirement savings plan there is still a consideration that is often overlooked. Money that is left in the plan cannot be added to and it would not be accessible through a loan.

It is possible to open a roll-over IRA if a new employer makes you wait before being able to make payments to the new job’s 401k plan. When doing this it is important to note that the check has to be in the trustee of the old plan to the trustee of the new plan. The other choice is to start a roll-over IRA at a brokerage or mutual fund firm. This option is available if your new employer does not have a 401k in place or sometimes the options of the new plan are not favorable.

Choosing to start a roll-over IRA at brokerage gives you instantly more investment opportunities. However the roll-over needs to be formed from trustee to trustee so that any taxes or penalties can be prevented. It is also best to keep money in a roll-over or conduit IRA apart from any other IRAs that might be owned. This means that the option is always there to start savings again in a 401 (k) plan of a potential employer.

It is necessary to roll an old 401(k) plan into a traditional IRA since there are different rules for paying into a Roth IRA. There are also differences in the rules between the 401 (k) plans and traditional IRAs.