When you change employers, you may have several options available to you with respect to your company’s retirement plan. The decision about what to do with your funds is an important one, so we have described your options below and listed the pros and cons of each.

1. Roll over your account balance to your new employer’s retirement plan.

Pros

  • Tax-deferred growth will continue
  • No early withdrawal penalties
  • Assets in the plan are protected from creditors
  • Fees may be lower

Cons

  • Limited to the plan’s investment options
  • Fees may be higher

2. Roll over your account balance to an IRA.

Pros

  • Tax-deferred growth will continue

  • No early withdrawal penalties

  • Assets in the plan are protected from creditors, although not to the degree of a qualified retirement plan

  • Complete flexibility of investment options

  • Greater distribution flexibility

Cons

  • Fees are likely to be higher

  • Cannot borrow against the assets

3. Leave your account balance in the plan.

Pros

  • Tax-deferred growth will continue

  • No early withdrawal penalties
  • Can choose other options later

  • Assets in the plan are protected from creditors, although not to the degree of a qualified retirement plan

  • Fees will almost certainly be lower

Cons

  • Limited to the plan’s investment options

  • 401(k) loans are not available

  • This may not be an option if your balance is less than an amount specified by the company

4. Take your account balance in cash.

Pros

  • Immediate cash

Cons

  • Possible 10% early withdrawal penalty
  • Immediate income tax increase
  • Tax-deferred growth ceases
  • Overall retirement goals may be impacted

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.