Roll savings to your new employer’s plan – This is an option if you are joining a company that oers a retirement plan.
Advantages Drawbacks
• Maintains tax-deferred status of savings
• Continue to make contributions and save for retirement
• Combine other qualified plans or IRA savings into one account
• Fees in employer plan may be lower than similar
individual accounts
• Plan fiduciary required to prudently monitor the cost and
quality of the investments options
• IRS penalty-free withdrawals if you’re at least 55 years old
in the year you leave your new job*
• Protected from creditors and bankruptcy
• Plan may provide access to planning tools, educational
resources and phone helpline
• Loan provisions may allow borrowing from the rolled over money
•
No required minimum distribution at age 72 (70½ prior to
01/01/2020) from a current employer’s plan is required,
unless you are a 5% or more owner of the company
• Changes made to the plan by your employer will impact
you (i.e., plan investments, fees, services, plan providers,
plan termination)
• Investment choices limited to those the plan oers
• Subjects you to limitations of the plan, including income
distribution provisions when you retire
• Account may be assessed fees for plan administration
or other reasons
• Access to personalized investment advice or advice that
takes into account your other assets or particular needs
may not be available through the retirement plan
• Plan may oer fewer or more expensive investment options
than your former employer’s plan
• May be more restrictive on withdrawals while employed
• Roll-ins may not be allowed or an eligibility period may need
to be satisfied
• In-kind transfers of company stock will result in appreciated
value being taxed as ordinary income at withdrawal from
the retirement plan
Check your new employer’s summary plan description to confirm plan details and requirements.
Cash out savings and close the account
Advantages Drawbacks
• Immediate access to cash
• May see significant tax advantage for company stock that
has substantially appreciated
• If after-tax contributions were made, could take these
amounts tax-free (though you will be required to pay tax
on the earnings of these contributions)
• At distribution, 20% withheld on the taxable account
balance for pre-payment of federal income taxes
• State taxes and a 10% early distribution penalty may also
apply on taxable account balance
• May move you to a higher tax bracket
• Forfeits future tax-deferred growth potential
• Not protected from creditors or bankruptcy
If this money is no longer set aside for retirement, will you have the savings you need when you want to retire or can no longer work?
*In-service withdrawals may be allowed while you are still working for
the company sponsoring the retirement plan. Check with the plan
administrator for details and requirements.
1
These considerations were prepared for pre-tax 401(k) accounts. Some – but
not all – of these considerations may also apply to other types of plans and/or
accounts (e.g., Roth after-tax accounts). You may wish to consult a tax advisor if
you participate in a dierent type of plan or hold a dierent type of account.
2
These descriptions are for general educational purposes and should not be
construed as advice or recommendations. This is not tax or legal advice and
you may wish to consult with your tax or legal advisors on these issues.
Insurance products and plan administrative services provided through
Principal Life Insurance Co., a member of Principal Financial Group,
Des Moines, IA 50392.
PG4810-05 | 01/2020 | © 2020 Principal Financial Services, Inc. | 1045862-012020
Keep savings in your former employer’s plan (continued)
Advantages Drawbacks
• IRS penalty-free withdrawals if you’re at least 55 years old
in the year you left your job
• Protected from creditors and bankruptcy
• Plan may provide access to planning tools, educational
resources and phone helpline
• Access to personalized investment advice or advice that takes
into account your other assets or particular needs may not be
available through the retirement plan
• No new contributions allowed
Check your former employer’s summary plan description to confirm plan details and requirements.