Changing Jobs or Retiring? Don't Forget Your Retirement Savings!

Your retirement savings plan offers you several choices for managing the money that has accumulated in your account when you decide to change jobs or retire. This may include amounts you have contributed, the vested portion of any amounts your employer has contributed, plus any earnings on those contributions.

You will want to think carefully before making any decisions about withdrawing the money in your retirement plan, as some choices may entail greater tax liability than others.

A Look at Some of Your Choices

Generally, you have three options for managing the money in your retirement plan when you change jobs or retire:

Keep your money in the plan:

When retiring, you might choose this option if your spouse is still working or if you have other sources of retirement income. Or, if you're starting your own business when you leave your current job, keeping your retirement money in your former company's plan may help protect your retirement assets from creditors, should your new venture run into unforeseen trouble.

Move your money to another retirement account:

Take a cash distribution:

To avoid paying taxes and/or penalties on a cash distribution consider redepositing your money within 60 days to an IRA or your new employer's qualified plan. In this case you'd have to make up the 20% withholding from your own pocket, but any excess tax payment would be refunded when you file your regular income tax return. 

The Potential Cost of a Cash Distribution


-20% Tax Withholding2

= Cash Amount Before Any Actual Taxes

$10,000 Distribution

-$2,000 Tax Withholding

= $8,000 Before Actual Taxes Are Paid


Retirees Should Consider Tax Consequences

There may be other distribution options available. Contact your plan administrator for information on all options available under your plan. Then be sure to consult a qualified tax and financial planning professional to ensure that your planning decisions coincide with your financial goals.


1Fees and investment expenses may be higher in an IRA than in an employer-sponsored plan. Rolling over employer stock from a retirement plan to an IRA may end up ultimately causing higher taxes on any potential gains on that stock. Also, if you plan to work past age 70½, an employer-sponsored plan may allow you to delay required minimum distributions.

2The tax rate applied to the distribution would be your actual marginal income tax rate plus any additional federal taxes. State taxes and penalties may also be due.