Changing jobs can be exciting and stressful. Maybe you’re in the early stages of sending out resumes and interviewing. Or you could already be transitioning to your new position. Either way, amid the upheaval, you’ll want to think about your retirement savings and how your job switch could affect it.
If you don’t think through the implications, a career change could have a big impact on your savings, potentially throwing your retirement plan off track. While you’re probably thinking about many different things right now, it’s important not to forget about your retirement savings. With careful planning, you’ll be able to hit your savings goals. Below are a couple of things to keep in mind as you switch jobs:
When are you eligible for your new 401(k) plan?
It’s typical for employers to have a waiting period until employees can contribute to their 401(k) plan. These waiting periods can vary. Some are 30 days, while others are as long as a year. Some employers may allow you to contribute quickly, but they may wait up to a year before they make matching contributions.
These long waiting periods can hamper your efforts to save for retirement. While a short delay of 30 days may not have a big impact on your savings efforts, a delay of six months or even a year could. You may want to negotiate a shorter waiting period. You could also consider an IRA or other investment vehicles that will allow you to continue to save.
What will you do with your old 401(k)?
There’s nothing that says you have to do anything with your 401(k) plan after you leave your old employer. You can just keep the funds in it and let it grow. But if you have multiple accounts, it could be difficult to manage a cohesive investment strategy. It might be worth your time to consolidate your old accounts so you can easily keep track of your savings.
One option is to cash it out and take a lump sum. However, doing this could create a taxable event. If you’re not yet 59½ years old, then you could also be hit with early distribution penalties. Another option is to roll your old 401(k) into an IRA. Doing this can help you avoid taxes and penalties. It can also give you more investment options than a traditional 401(k). Talking to a financial professional can help you decide which options are best for you.
Have you communicated with your new plan administrator?
If you’ve already made contributions to your 401(k) this year, then it’s important to communicate those contributions to your new plan admin. In 2017 the max contribution to your 401(k) if you’re under age 50 is $18,000, while the limit is $24,000 for those age 50 and older.1 If you go above those amounts, you could create a potential tax issue.
Talking to your new plan administrator can help you avoid this risk. If they know how much you’ve already contributed, they can help you stay below the limit.
Ready to learn more about retirement planning? Contact us at Foote Financial Group. We can help you evaluate your objectives and needs, and then develop a strategy. Let’s connect soon and start the conversation.
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