Few life events are more stressful than a job loss.
If you or someone you know is in this situation due to COVID-19, you’ll likely have several questions about job hunting, unemployment insurance, and health care. You may also be wondering, “What should I do with my 401(k) retirement plan?”
People leaving an employer typically have four options with their 401(k) plan, but it’s not an all-or-nothing decision. Depending on your situation, it may be possible to engage in a combination of these options:
- Leave the money in your former employer’s plan, if permitted
- Roll the assets over to your new employer’s plan, if one is available and rollovers are permitted
- Roll the assets into an Individual Retirement Account (IRA)
- Cash out the account value
Each choice offers advantages and disadvantages. If you are uncertain which action to take with your retirement accounts, please reach out. Over the years, we have found the best financial decisions are the ones that consider all available options. Your ultimate decision depends on a variety of factors.
You also may have heard that the CARES Act waives the 10% early withdrawal penalties on 401(k) plans, giving some account owners up to three years to replace what they took out. Remember, this new legislation may not cover loans unrelated to the COVID-19 crisis.
If you have questions about what rules apply, you may want to get in touch with your former employer’s human resource team. Also, contact your financial advisor to discuss which option(s) make the most sense for you and your financial future.