Time For A Change

For many, the New Year ushers in change – change of habit, a change of thought, and quite possibly, a change of career. If a career change is in your future, you should ask, “What about my 401(k)? ” Great question. And centsyouasked, the following should help:

Do nothing: Keep your savings in your previous employer’s retirement plan (if allowed.)

Why?

1) Money continues to grow tax-deferred.
2) You avoid the 10% early withdrawal penalty if under age 59.5.
3) Little or no paperwork.
4) Your plan may allow you to take loans.
5) Your investment strategy remains intact.
6) You may be allowed to withdraw money without penalty.

Why not?

1) The plan may place limitations on inactive accounts.
2) Investment options will be limited to those offered in the plan.
3) Withdrawals and distributions are subject to the plan’s provisions.
4) The company may be acquired and/or change the plan in the future.

(Your HR representative or Plan Administrator should be able to clarify the above.)

Roll your savings to an IRA

Why?

1) Money continues to grow tax-deferred
2) You avoid the 10% early withdrawal penalty if under age 59.5
3) You may have access to additional investment opportunities.
4) You control how to access your savings.
5) Flexibility to move your IRA rollover assets into a future employer’s plan.
6) Potential to convert your assets to a Roth IRA in the future.

Why not?

1) Required minimum distributions must begin at age 70.5.
2) No loans against your account are permitted.
3) The fees could be higher than if left in the plan.

(If this is the option for you, notify your employer that you’ll be initiating a rollover and obtain the proper distribution forms. Choose an IRA provider and complete an account application. CapSouth can help. Call the following number: (800) 929-1001.)

Rollover to your new plan: Move your savings into your new employer’s retirement plan.

Why?

1) Money continues to grow tax-deferred.
2) You avoid the 10% early withdrawal penalty if under age 59.5.
4) Your new plan may allow for loans.
5) Your retirement assets are consolidated with one provider.

Why not?

1) There may be a waiting period before you can transfer your balances into the new plan.
2) The new plan may have higher fees than the old plan.
3) Investment options are limited to those offered in the new plan.
4) Withdrawals and distributions are subject the plan’s provisions.
5) Investment options and features offered by your previous plan may be more favorable than your new employer’s plan.

(If this is the option for you, you’ll need to check with your new employer to confirm their plan accepts rollovers. If so, they will provide the necessary paperwork to initiate the rollover.)

Take your savings in cash

Why?

1) Immediate access to a portion of your money.

Why not?

1) Your savings will no longer grow tax-deferred.
2) Without compounded growth, you short-change your potential for wealth in retirement.
3) You may have a 10% early withdrawal penalty that generally applies to people under age 59.5.
4) Your distribution will be subject to all applicable federal, state and local taxes.

(If you believe this is the option for you, please speak with a qualified tax advisor regarding your potential tax liability. Do this BEFORE requesting the cash distribution and understand how this will affect your retirement savings.)

Please consider your options carefully before making any decision with respect to your retirement savings. To ensure that you successfully negotiate all the details, especially the tax ramifications of each option, you should consult with your tax advisor. Your retirement plan savings will most likely make up the largest single asset you ever have. Change is great. Informed change from the application of wise counsel is best.