Changing Employers? Starting a New Job?

New job? Congratulations!

We know you're busy getting settled—but have you thought about what you're going to do with your savings in your former employer's plan?

Old Plan Money…What to Do?

You could leave it where it is; however, many people find that consolidating accounts into one makes it easier to manage and track your retirement funds. So, you may want to rollover your old account to your new employer's plan or to an IRA. A plan-to-plan transfer is another option, if both your old plan and new one are the same type of plan (e.g., both are 403(b) plans or both are 457(b) plans) and both plans permit this type of transfer.

What you should not do is treat the money in your former employer's plan as a gift check and spend it. If you do, you could end up with a big tax bill and possibly tax penalties. That's because pre-tax contributions and earnings2 are taxed when you withdrawal them. And if you're under age 59½ you may have to pay an additional 10% federal penalty tax.3 Equally important, you lose money that could be working to help fund your retirement.

Save It; Don't Spend It

Consider this: at the 28% tax bracket, a $50,000 lumpsum payout would create a tax bill of $14,000—maybe even $19,000 if the recipient is under age 59½. And the higher the tax bracket, the bigger the tax bill.

For More Information

Talk to a Financial Professional about how you can best protect your retirement savings when you change employers. We can help you explore the best way to make that money work for you and your family—in the midst of change. Your financial professional can also help you review your options.

1 CDs are Insured by the FDIC up to $250,000 per depositor, per institution.
2 Earnings on Roth after-tax contributions may also be taxed unless certain conditions are met.
3 Applies to distributions from 403(b), 401(a), and 401(k) plans.

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