Leaving Your Job? Don’t Leave Your 401(k)

Pack up your finances along with your desk.

Experts say many departing employees cash out these retirement accounts when they leave an employer, even though that’s the most expensive choice. Not only do you lose your long-term safety net, but you may have to pay a 10 percent early-withdrawal penalty and income tax on the withdrawal. That can be a sizeable sum.

If you’re moving to a job that offers a 401(k), the best option may be a direct rollover. After all, you don’t want to pass up “free” money if your new employer will match a portion of your future contributions. The retirement plan administrator at your old company can help you arrange for your money to be wired into your new employer’s 401(k).

If your new employer doesn’t offer a 401(k) or doesn’t match your contributions, consider rolling your money into an individual retirement account (IRA) to keep your tax-deferred contributions growing. Some IRAs charge lower fees than 401(k) plans—and they may offer you a greater choice of individual investments, too.

So while you’re packing up your potted plant and Dilbert calendar, don’t forget to pack your 401(k). You’ll be glad to have it later.

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