Switching jobs? What you MUST know about your 401k.

By Mike Rowan, www.Erollover.com 2008

Congratulations! You have taken the plunge and have that new job that you have sought for so long! Then, all of the sudden, you think of your 401k and may wonder, “What on Earth am I supposed to do?”.

There are many options for your existing 401k or retirement plan when you change jobs. For the most part, it opens up many options with regards to moving your plan and customizing it according to your individual retirement goals and needs. However, there are several 401k stipulations with which an investor must be very aware. If not followed exactly, it could possibly result in some major penalties for your 401k or retirement plan.

401k Rollover Options :

1. Rollover your 401k over into a personal retirement account (IRA)
2. Leave your 401k with your current employer
3. Rollover all or a portion of your 401k to your new employer
4. Take a full or partial withdrawal

Roll your 401k over into a personal retirement account (IRA).

Advantages :
Gain full control of your retirement plan
Gain full control of your investment options
Access to fully customizable asset allocation models
Easy and inexpensive access to professional investment advice
Flexibility in executing your decisions

Disadvantages :
None

Leave your 401k with your current employer: Rules and limitations apply depending on your employers specific retirement savings plan rules.

Advantages :
Convenience

Disadvantages :
Current employer retains control over your investment options.
You may not have access to the investment vehicles appropriate for you.
Limited access to professional investment advice.

Roll over all or a portion of your 401k to your new employer. Rules and limitations apply depending on your new employers specific retirement savings plan rules.

Advantages :
None

Disadvantages
New employer gains control over your investment options.
You may not have access to the investment vehicles appropriate for you.
Limited access to professional investment advice.
Continues circle of having to roll over accounts as you change jobs.

Take a full or partial withdrawal with the check payable to you. Beware of withdrawing money from your retirement savings plan account because you will owe current income taxes on the eligible portion of your withdrawal. In addition, if you take the withdrawal before age 59 1/2, you may also owe an additional 10 percent early withdrawal penalty.

Advantages
Instant access to a small portion of your funds.

Disadvantages
Taxes are payable, either 20 % instantly through withholding or Income taxes.
10 % penalty tax will apply to most withdrawals before age 59 ½
Your financial independence might be in jeopardy.

As you can tell, rolling over your 401k, 403b, or retirement plan, can be either the best or worst thing that you did for your retirement planning. Generally, moving your 401k to an IRA tends to be the most favorable action. However, as previously stated, you must know the 401k guidelines, or you may face severe penalties!

Please visit our site for more retirement and 401k details:
www.erollover.com

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