Changing Jobs? Here's What You Need to Know!
Did you know that the average American will work 12 different jobs in their lifetime? If you’re in the midst of one of these career or job changes yourself - I applaud you for pursuing your dreams! That takes a lot of bravery!
Something you can’t forget during your transition is your long-term financial plans. Let’s find out what impact a job change can have on your financial future.
Understand the Basics of a Rollover
If “rollover” sounds more like something you’ve taught your dog, it may be time to review what this means. A rollover is when you merge one account into the next, often referring to retirement accounts. It’s an important option to consider when changing jobs.
In more technical terms, you will withdraw the cash or assets from one eligible retirement plan, and contribute all (or part of it), within 60 days of withdrawal, to another eligible retirement plan. This is permissible by the IRS, assuming it follows the IRS rules
Some examples of eligible accounts include:
401(k) to IRA
403(b) to IRA
Employer-sponsored plan to new employer-sponsored plan
When you roll over your retirement savings, there are several benefits. You could consolidate your accounts, broaden your investment choices, and potentially lower your fees.
Prior to rolling over assets from an employer-sponsored retirement plan into an IRA, it’s important that you understand your options and do a full comparison of the differences in the guarantees and protections offered by each respective type of account as well as the differences in liquidity/loans, types of investments, fees and any potential penalties.
Deciding When to Rollover Retirement Accounts
One of the difficulties of financial advising is that many people want a quick answer to a short question. Each person has a unique set of circumstances, challenges, advantages, and factors that weigh in on your decisions. Even two people moving from the same old job to the same new job would have various factors that make their best options different!
One important thing to remember is that removed funds must be put into another eligible account within 60 days. If the transition takes additional time, you may face tax implications or penalties and fees.
Timing your rollover must be done to help you avoid the common pitfalls, which include cashing out too early or leaving an account with a former employer. This is one of the many times I would HIGHLY suggest seeking the advice of a financial advisor. Reviewing your unique circumstances can be done one-on-one with an experienced professional.
Roles of Financial Advisors in the Rollover Process
A financial advisor can review the entire process, help you with paperwork to put the plan into motion, explain the tax implications of your choices, and be sure you are complying with all regulations.
My job is to help you make smart decisions with your financial future. The options of how and when to rollover your retirement funds are best reviewed with a professional.
Beyond the Rollover
A rollover is one main component of financial planning around a job change. But, it is not the only thing to consider. A financial advisor like me can also assist you, as a client, in adjusting your entire financial strategy.
For better or worse, there’s a good chance that with this new job, your salary will be changing. This may necessitate a new budget for you and your family. You may want to review your retirement contributions and your savings plan, too. There are many aspects that you may want to review, so reach out to me and I can help you make sure you’ve checked all your boxes!
