Currently, there are a record number of jobs opened to Americans. Specifically, 10.943 million. What’s interesting is the number of employees quitting their current job to fill these new openings. In the month of July, 4.0 million American’s decided to say “I quit.” As the chart below infers, they likely wouldn’t say this unless they have something planned such as, starting their own business or accepting another position. When working with clients who have changed jobs, they often ask what should I do with my employer retirement plan? The answer depends on your personal financial goals, but you do have four options.
Option 1: Leave It
You could leave your retirement funds with your current employer plan. There are tradeoffs and benefits to this strategy you should consider.
Benefits include avoiding potential taxes and penalties until distribution, lower fees and expenses for investing, and potential early access to penalty free withdrawals if your plan allows it.
Tradeoffs include less individual control, limited investment options, limited access to financial advice, and the hassle of tracking multiple accounts.
Option 2: Move It
If you’re quitting to take another job, you could move your retirement funds to your next employer plan if they allow plan rollovers.
Benefits include avoiding potential taxes and penalties until distribution, lower investment fees and expenses, potential early access to penalty free withdrawals if your plan allows, and the ability to delay required minimum distributions while you’re still working.
Tradeoffs include less individual control, limited investment options, and limited financial advice.
Option 3: Roll it
Suppose you don’t like option one or two. In that case, you might consider rolling your retirement funds into your own individual retirement account.
Benefits include greater individual control, more investment options, access to financial advice, and account consolidation.
Tradeoffs include higher investment fees and expenses.
Option 4: Take it
Your final option is to take the money out of your employer plan. The benefits and tradeoffs are slightly different from the previous options; however this can still be valuable in certain situations.
Benefits include greater individual control, and access to funds immediately
Tradeoffs include longevity risk, funds are generally taxed the year distributed, and could result in a 10% penalty if under age 59 ½ .
I hope this was helpful. If you’re one of these 4 million American’s saying “I Quit,” I recommend sitting down and reviewing these options. You might be saying “I Quit” to your former employer but don’t say “I Quit” to your future self.
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this blog are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Advisory Services Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.
Bureau of Labor Statistics. (2021). Job Openings and Labor Turnover- July 2021. Retrieved from Job Openings and Labor Turnover – July 2021 (bls.gov)
U.S. Bureau of Labor Statistics, Job Openings: Total Nonfarm [JTSJOL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/JTSJOL, September 9, 2021
U.S. Bureau of Labor Statistics, Quits: Total Nonfarm [JTSQUR], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/JTSQUR, September 9, 2021.