Changing Jobs? Been Laid Off? Find Out What Happens to Your 401(k) by United Capital Management of Kansas

Finances
a month ago
Changing Jobs? Been Laid Off? Find Out What Happens to Your 401(k)

There have been many changes to our labor market during the COVID-19 pandemic. People have found themselves furloughed, laid off or simply needing to change employers or professions for one reason or another.

When an individual leaves a job that has offered a 401(k) plan, they have several options as to what can be done with their account balance:

  • Leave it in the company plan. There can be some advantages to leaving a 401(k) balance in the company plan. Group plans may offer lower investment fees and balances may be protected by creditors. If you have appreciated company stock, there may be a favorable capital gains tax rate on the NUA (Net unrealized appreciation) of employer stock upon distribution after certain qualifying events. RMD's (Required Minimum Distributions) at age 72 do not actually begin until you retire unless the participant is an owner of 5 percent or more of the company.
  • Withdraw and pay taxes. A distribution from the 401(k) plan will be considered ordinary income and will be taxable to the participant. Due to the CARES Act, if you have been impacted by COVID-19 a participant can temporarily spread the tax liability over three tax years and if you are under the age of 59 1/2 the early withdrawal penalty will be waived.
  • Roll to another company plan. If a participant begins working for a new employer it is possible to roll the balance into the new employers 401(k) plan if the plan accepts rollovers. This consolidation can be a convenient way to track assets as they will be in one place.
  • Roll to an IRA (new or existing). This option may give a participant more control and additional investment options such as managed accounts, annuities, and alternative investments. This can give you the opportunity to diversify your portfolio into assets not currently available to you.

Any 401(k) withdrawal or rollover should be considered carefully. There is no one-size fits all answer and each participant will have their own unique set of circumstances, objectives and time horizon.

As always, consult a trusted advisor about specific recommendations based on your individual circumstances. A financial professional can help mitigate risk in your portfolio and identify strong opportunities.

This article was authored by Shannon Benish. Shannon is securities licensed in the states of Kansas and Maryland. She is IAR registered in the state of Kansas.

The content on 30Seconds.com is for informational and entertainment purposes only, and should not be considered financial advice. The opinions or views expressed on 30Seconds.com do not necessarily represent those of 30Seconds or any of its employees, corporate partners or affiliates.

Take 30 seconds and join the 30Seconds community. Inspire and be inspired.

Related Products on Amazon We Think You May Like:

30Second Mobile, Inc. is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for us to earn fees by linking to Amazon.com and affiliated sites.

The Coronavirus (COVID-19) Pandemic & Your Finances, Where Do We Go From Here? The Building Blocks of Financial Planning

Is It Time to Dump Your 401(k)? 7 Reasons Why the 401(k) Has Failed Many Americans

Surviving the Economic Wreckage of the Coronavirus (COVID-19) Pandemic: ​Adam Markel's 3 Rituals of Resilience You Can Start Today

10 Reasons to Wear a Face Mask During the Coronavirus Pandemic (No. 5 & 8 Will Save You Money!)

Elisa A. Schmitz 30Seconds
Such helpful advice, especially during these extra challenging times. Thank you for sharing, United Capital Management of Kansas !
Tribe
Lots to think about here.

join discussion

Please login to comment.

recommended tips

Worrying About Money? Here's Why You Should Try Being Grateful Instead!

Thinking of Buying a Home? 6 Things NOT to Do With Your Finances!

Preparing Your Tax Return: 4 Life Events That Affect Your Taxes!

Money Magic: Here's Your Ultimate 2-Step Guide to Debt Freedom!

Got 30 seconds? Sign up for 30Seconds.com and get the best of our tips each week!