Your rollover and transfer options
1. Leave the money in your former employer's workplace retirement plan
You may have the option to leave the funds in your former employer's plan, where it will continue to grow tax deferred. Leaving your retirement plan money in your former employer’s retirement plan may be a good idea if you like the investment options offered in the plan, or if you need extra time to explore your options. Be sure to check how the plan is set up. Some employers require a minimum balance to hold onto your plan account, while others may charge a fee to continue to administer it.
2. Roll over the money to your new employer's plan
If you’ve started work elsewhere, and your new employer offers a plan, you might choose to roll over money from your former plan to the new one. A direct transfer will preserve your tax benefit and help you avoid penalties. You may find this to be a good option if the investments and fees are better in the new plan, or if you prefer to have your savings in one place where you know you’ll monitor them.
3. Move the money to an individual retirement account (IRA)
Rolling money over directly into an IRA will also preserve your tax benefit and prevent penalties. Additionally, IRAs tend to have more investment options than workplace retirement plans. A rollover IRA is a solid option if you don’t want to leave money in your former employer's plan, or don’t have another employer plan to transfer to.
4. Withdraw your money
Although it’s possible to take money out of your old plan, don't dip into your retirement funds unless you have no other options. You'll pay income tax and a 10% early withdrawal penalty if you're under age 59½. If you have a Roth 401(k), only your earnings will be subject to tax and penalty.
The bottom line
You have several options to deal with plan savings in a job transition. Preserving your tax benefit and avoiding penalties should be your primary concerns. From there, your personal preference for managing savings will determine what you do with your plan when you change jobs.
Ready to learn more about workplace retirement plans?
If your workplace retirement plan is with BB&T, you can contact us at 800-228-8076 and speak with a representative about your retirement plan options.
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The information provided should not be considered as tax or legal advice. Please consult with your tax advisor and/or attorney regarding your individual circumstances.
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