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GOING SOMEWHERE?

Writer's picture: Keith Richardson CPA, CFP, PFSKeith Richardson CPA, CFP, PFS

You’re on to the next adventure in your life and career, but don’t forget about your retirement account. It’s important to explore your options to keep that money working hard for your future.


Will you:

  • Move your account balance into an Individual Retirement Account (IRA)?

  • Move it into your next employer’s plan?

  • Leave the money where it is?

  • Take a cash distribution?

Avoid the temptation to take the cash

Saving for retirement means thinking ahead. While it’s perfectly normal to be tempted to cash out the money you’ve saved in your retirement plan, that may not be your best option. There are significant tax ramifications to consider. And, depending on your age, you could be subject to an IRS penalty for withdrawing your money too early. John and Sarah are both 45 and have each saved $75,000 in the company retirement plan. Upon leaving the company, Sarah decides to cash out her balance, while John rolls his money into his new employer’s plan. Compare the results of John and Sarah’s choices on the right.


Cashing out vs. staying invested




















Sarah only has $50,6254 in her pocket after taxes and penalties. She starts over in her next employer’s retirement plan, and invests for 20 years.


John rolls his $75,000 into his new employer’s plan and continues to invest in that retirement plan for the next 20 years. At 65, Sarah has $142,250 in total retirement

savings, compared to $491,821 for John. That can make a big difference at retirement.


Staying invested: a recap

As the previous illustration shows, keeping your retirement savings invested, instead of cashing out, is potentially a better option for many people. As far as staying invested, your options include leaving the money where it is, moving it to your current employer’s plan, or moving it to an Individual Retirement Account (IRA). In any case, your money will have the potential to continue to compound and grow on a tax-deferred basis. Whatever option you choose, it’s important to think ahead and understand the pros and cons of any actions you take.


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RP-0291-0419 | Tracking 1-844808 (Exp. 04/21)

 

The information provided is not intended to be the primary basis for your investment decision. This material is for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.


Securities and advisory services offered through LPL Financial, member FINRA/SIPC.

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