Changing Jobs or Retiring?

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Switching Employers? 

Switching Employers?  Safeguard Your Retirement.

You’re tired of your job and you’d like to make a switch. Here’s something to keep in mind.  The average American works 2.3 years at a job before changing it. Often, when you do make the switch, you have to decide what to do with that 401(k), 403b or other retirement plan you’ve built while there. Your challenge is to ensure you are not losing savings momentum when you make the shift.  Some decisions will serve you well; some could prove to be disastrous. Buyers beware.

Avoid the Cash Trap
It is tempting to take the cash. But if you did take a lump-sum distribution and are under age 59 1/2, there are a few things that will happen. The IRS could withhold 20% of your funds in anticipation of the income tax you'll have to pay.  Also, there will be a 10% early withdrawal fee. So, you could expect up to 30% of your retirement proceeds to simply vanish, and possibly more if you have a high tax rate.

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Your New Employer’s Retirement Plan Options May Not Offer Solid Options
Each company has different rules and regulations regarding retirement plans. Some firms will match employee contributions; some cannot or may not.  You may find that your new company’s 401(k) restricts financial options far more than your past plan did and may leave fewer financial choices. The best plans would permit a broad range of flexibility with no cost for switching among them. Unfortunately, these plans are the exception.

In today’s economic climate, there is usually a lack of diversified choices offered by your new company, and an increasing number of pitfalls afflicting corporate plans.

First, with the great number of mergers and buy-outs, only one plan will be a successor. That means you could be stuck on the losing side. One consequence is that old loans against your existing 401(k) could be considered a taxable dispersal which will leave you with penalties and tax ramifications. Or you may suddenly face blackout periods where you can’t make any decisions regarding your money until the “battle of the plans” is resolved. Another downside to consider is employer fraud. It has recently surpassed employee fraud in the dollar amount of damages caused. Retirement funds are a major source of the abuse.

Self-Directed IRA’s. Or, “Now you’re in the driver’s seat.”
With a self-directed IRA, you can easily rollover your old 401(k) or 403b, and maintain the tax-deferred benefits while avoiding taxes and penalties. But there’s another important reason why this might be your best plan-successor choice: you’ll have the greatest range of options in funding your plan while eliminating the risks mentioned above.  Best of all, you can direct financial decisions yourself rather than be limited to the options an unseen new plan administrator chooses.

For a portion of your retirement assets, the Golden IRA may offer a great way to diversify your assets.