If you’ve lost your job or are changing jobs, you may be wondering what to do with your 401(k) plan account. It’s important to understand your options.
When leaving a job or changing jobs, you are entitled to your 401(k) vested balance. Be sure to understand how your particular plan’s vesting schedule works, because you could forfeit employer contributions that haven’t vested by the time you are leaving or changing jobs. Your 401(k) Summary Plan Description will spell out how the vesting schedule for your particular plan works.
While the vested pool of dollars you are entitled to may look attractive, don’t spend it unless you absolutely need to. If you take a distribution, you’ll be taxed, at ordinary income tax rates, on the amount distributed from your account, except for any after-tax or Roth 401(k) contributions you’ve made. In addition, if you are not age 55, another 10% penalty may apply to the taxable portion. You should consider talking with a tax advisor before taking a distribution.
You may have the option, if your vested balance is more than $5,000, to leave your money in your employer’s plan at least until you reach the plan’s normal retirement age (typically age 65). Another option you have is to make a direct rollover to an IRA or to another employer’s 401(k) plan. Assuming both of these options are available to you, you need to weigh all the factors and make a decision based on your own needs and priorities.
Your decision on what to do with your 401(k) may have significant consequences–both now and in the future. If you need assistance on what to do with your 401(k), call and talk with a professional at TFCU Financial Advisors today.
TFCU Financial Advisors
6501 Tinker Diagonal, MWC
(405) 737-0006
TFCUFinancialAdvisors.org
Securities are offered through RAYMOND JAMES FINANCIAL SERVICES, INC., Member FINRA/SIPC, and are not insured by NCUA or insured by any other government agency. Funds are NOT GUARANTEED nor are they deposits or obligations of the credit union or any affiliated entity of the credit union, and are subject to risk, including the possible loss of principal. Tinker Federal Credit Union, Tinker Financial Services, LLC and TFCU Financial Advisors* are not registered broker/dealers and are independent of Raymond James Financial Services, Inc. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc., a non-affiliated third party provider to Tinker Financial Services, LLC and Tinker Federal Credit Union. All investments and information are intended for U.S. residents only. *TFCU Financial Advisors is a registered trademark and ‘dba’ of Tinker Financial Services, LLC. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.