It is important to know what options you have with respect to your 401(k) plan when changing jobs or being laid off. Here are a few common options:
- Roll the funds over to an IRA: You can choose to roll the funds over into an existing or a new IRA, which typically will provide more investment options and flexibility.
- Roll the funds over to a new employer’s 401(k) plan: If you start a new job that offers a 401(k) plan, you can roll over the funds from your old 401(k) plan into the new plan.
- Leave the funds in the old plan: If your balance is over $5,000, your former employer may allow you to leave the funds in the old plan.
- Cash out the plan: This option generally triggers taxes and penalties and reduces the funds available for your retirement.
If you need access to the funds in your 401(k) before retirement, you may be able to take out a loan against the plan, subject to certain rules and regulations. It’s important to consider the terms and implications of a loan before taking this option, as failing to repay the loan on time may result in taxes and penalties.
It’s worth considering the pros and cons of each option and it may be beneficial to speak with a Financial Advisor, as each option may have different tax implications and impact on your long-term financial goals.