I lost My Job. What Happens to My 401(k)?

9/4/2020

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I Lost My Job. What Happens to My 401(k)?

You have some options

Provided by Kurt Decker and Joe Mandujano

Heritage Financial Representatives

If you’ve suddenly lost your job, what would happen to your retirement money? You’re not alone in this fear, but you have choices of what to do with your 401(k).

Leave your 401(k) alone. The money remains invested in your former employer’s plan, if permitted. There are potential drawbacks, however: your investment choices may be limited, the plan fees may be high, and you may not be able to quickly access your money or do what you want with it.

Withdraw the money. This comes with a financial penalty, and it may be a “last resort.” Distributions from a regular, non-Roth 401(k) are defined as taxable income by the Internal Revenue Service. A 10% additional tax usually applies if you make a withdrawal prior to age 59½, but the 2020 CARES Act waives the 10% early withdrawal penalties on 401(k) plans, giving some account owners up to three years to replace what they took out.1

Roll it over into an Individual Retirement Account. Moving the 401(k) assets into an IRA via a rollover or trustee-to-trustee transfer. This isn’t perfect for every financial situation, but it may be the one with the most positive outcome for you.2

Roll the assets over into a new employer’s plan. Some employers permit this. If the new workplace retirement plan has higher fees and reduced investment choices compared to your old one, you might be better off leaving your savings in the old plan.

How is your money positioned?How are you invested today? How prepared would you be if you lost your job? Are you doing things designed to preserve and enhance your retirement money? You may want to talk about your options.

 

Kurt Decker may be reached at (812) 253-6928 Ext 2453 or kdecker@hfcu.info.

Joe Mandujano may be reached at (812) 253-6928 Ext 2452 or jmandujano@hfcu.info.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, which is not an affiliate of the credit union. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

Citations

1 - IRS.gov, October 29, 2020

2 - Investopedia.com, January 18, 2020



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