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Retirement Plan Options in the 21st Century

Job or career hopping, or taking a self-imposed mid-career sabbatical, may leave a trail of neglected retirement accounts. Adviser Brad Wright outlines some options for managing all of these accounts.

By Brad Wright, CFP®

Unlike our parents and grandparents who were often employed by one or two companies over their entire working lives, today’s workers tend to job hop or career hop or even take a self-imposed mid-career sabbatical. If we’re not paying attention, frequent job changes could leave a trail of neglected retirement accounts in our wake. At some point it’s important to zoom in on our various 401(k), 403(b), or 457 plan accounts and figure out what to do with them. It may be cost-effective and improve your investment returns to do that sooner rather than later.

Brad Wright

Brad Wright, CFP

After you’re formally separated from your employer, whether laid off or you resigned, you generally have options about what to do with your retirement account:

Leave it where it is – It’s typical for plans to allow you to leave your money in your current account if your account total is above a certain dollar amount. You do stand the chance of forgetting or neglecting it though. Also, why would you want to leave your money with a company that no longer values your services or that you no longer value?

Move it to your new employer’s plan – Your new company will most likely encourage this, as they would welcome additional assets in their plan. You should evaluate the new plan’s investment options, costs, and any restrictions before making that decision.

Roll it over to an individual retirement account (IRA) – Many times, if you have multiple 401(k) accounts, consolidation could be best. You should compare costs and understand the differences between an ERISA-protected plan (the Employee Retirement Income Security Act of 1974) and those that are not. The benefits of rolling your money over to an IRA include consolidation and typically more investment choices.

Cash it out – This option gives you immediate access to your savings, but at a cost. Your money would no longer be tax-deferred and if you’re under age 59 ½ you would also be subject to a penalty.

So, you have choices. The ball is in your court. Should you choose to roll your former employee account either to your current employer’s plan or to an IRA, make sure it’s a direct custodian to custodian transfer. The check should not be made payable to you or you may be subject to tax withholding and penalties.

Additionally, once you are age 59 ½ and above, you may be able to roll your current retirement account over to an IRA, even if you’re still working there. It’s called an in-service distribution. Many, but not all, company retirement plans offer this option. You would only be able to rollover the money you contributed, any employer contributions that are 100% vested and any gains attributed to those monies. Unvested employer contributions would need to remain, which in theory is fine because you’ll still be contributing to the account as you continue to work there.

Remember that you have options about what happens to your retirement account(s) when you move on from an employer.

It’s always in your best interest to consult a CERTIFIED FINANCIAL PLANNERTM professional, as well as a tax expert prior to executing any of the above.

About the author: Brad Wright, CFP®

Brad Wright, CFP® is co-founder of Launch Financial Planning, LLC, a fee-only fiduciary firm located in Andover, MA. He is a frequent contributor to WCVB-TV and Mix 104-1 Radio. Brad is Chapter President of the Financial Planning Association of Massachusetts. Learn more about Brad at

The opinions penned here are for general information only and not intended to provide specific advice or recommendations for any individual.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Brad Wright.