Retirement Plan Considerations When Changing Employers

For individuals changing careers or moving to a different job, the retirement account with the previous employee is often either cashed out, which results in losing some of the funds to taxes, or moved to another retirement account. However, sometimes going against instinct and leaving the retirement account with the previous employer may be best. Here are three situations that may warrant additional consideration for if keeping the previous employer retirement account will be beneficial:

1. The plan is simply lower-cost and higher benefit than the retirement plan offered by the new employer.
2. When keeping the 401(k) will provide more benefit than rolling over to an IRA, such as the ability for those age 55 to 59.5 to withdraw without penalties from a 401(k).
3. When the previous employer plan includes company stock, which has favorable tax benefits.

See Dan Caplinger, 3 Reasons to Stick With Your Ex-Employer’s Retirement Plan, Daily Finance, Oct. 17, 2014.