Managing your retirement plan under a new employer

Long version

Your employer-sponsored retirement plan is a valuable asset. But sometimes things happen that can affect the status of your plan. So, for example, if you work for a hospital that changes ownership, and you have been participating in a 403(b), 457(b) or 401(k) retirement plan, what should you do with it now?

Basically, you have four options:

  • Cash out your plan
    You can simply cash out your plan and take the money, but you’ll have to pay taxes on it, and possibly penalties as well. So, unless you really need the funds and you have no other alternative, you may want to avoid liquidating your account.
  • Roll your account into your new employer’s plan
    If it’s allowed, you can roll over your old 403(b), 457(b) or 401(k) plan into your new employer’s plan. Before making this move, you’ll want to look at the new plan’s investment options (which should be numerous) and fees (which should be low). If you move the money directly to the new plan, you won’t be taxed at the time of the transfer, and your funds can continue to grow tax-deferred.
  • Leave your plan with your old employer
    If your account balance is above a certain level, you may be able to leave your plan with your old employer’s plan administrator. You won’t be able to contribute any more money to the plan, but if you like the investment options you’ve chosen, keeping the money in your old plan might be a viable choice.
  • Move your account into a traditional IRA
    One possible advantage to moving your 403(b), 457(b) or 401(k) into a traditional IRA is you’ll open up a world of new investment options, because you can fund your IRA with virtually any type of vehicle, including stocks, bonds, mutual funds, certificates of deposit (CDs) and exchange-traded funds. And if you already have a traditional IRA, you can combine the new funds with the old ones, making it easier to track your holdings. As is the case with leaving your money in your old employer’s plan or transferring it to a new plan, you’ll continue to benefit from tax-deferred growth. Keep in mind, though, that IRAs have costs, too, possibly including transaction costs to buy or sell new investments. (One more thing to keep in mind: When you want to move a retirement plan to an IRA, you may want to make a direct rollover, so the old plan’s administrator moves the money directly into the IRA, allowing you to avoid immediate taxes. If you were to make an indirect rollover, you’d get the money yourself, but your old employer would have to deduct 20% for federal taxes, and you’d have to deposit the entire balance, including the withholding, into your IRA within 60 days.)

Which of these choices is best for you? There’s no one “right” answer for everyone. You’ll want to consider all the options and possibly consult with your tax advisor and financial professional. But do all you can to protect your retirement plan – you’ve worked hard to build it, and you’ll need to rely on it to help you pay for your years as a retiree.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Edward Jones. Member SIPC.

Number of words: 524

Short/Radio version

PSA: Managing Your Retirement Plan Under a New Employer

TBA: Nov. 30, 2020

Words: 191 (excluding FA’s name, address/phone number)

If your employer gets bought out, what should you do with your 401(k), 403(b) or 457(b) retirement plan?

Basically, you have four choices.

First, you could cash out your plan, but you’d have to pay taxes and possibly penalties.

Second, you could leave your plan with your former employer’s plan administrator, if allowed. This might be a good choice if you liked your old plan’s investment options. You wouldn’t be able to make new contributions, but you’d still enjoy the benefits of tax deferral.

Third, you could move your account to your new employer’s plan. Just make sure you understand your new investment choices and the fees involved.

Finally, you could roll over your account to a traditional IRA. You’d be able to invest your money in almost any type of vehicle – stocks, bonds, mutual funds and more, and your money could continue to grow tax-deferred.

There’s no one “right” choice for everyone. Consult with your tax advisor and financial professional to determine which option may be best for you. You’ve worked hard to build your retirement account and you’ll need it to help pay for your years as a retiree.

This is (FA’s NAME), your Edward Jones financial advisor at (Branch address or phone #).

Member SIPC

Number of words: 191