How Changing Jobs Can Affect 401(k) Plans

Think you know all the relevant facts about your 401(k)? Do you have any idea of the factors that you'll need to take into consideration if you decide to change jobs? Many people leave one job to take another one that pays slightly more, not realizing that they may be costing themselves thousands of dollars in retirement money.

You might actually be surprised to find out that there's more to the fine print of your 401(k) than you realized. To make sure that you're as prepared for retirement as you think you are, be sure to take the time to make sure you understand the truth about the terms of your qualified retirement plan - especially if you're thinking about changing jobs in the near future.

1. Is the Company Match Really Yours?
Make sure you understand your company's vesting cycle. The fact that your company is matching a portion of your contributions to your 401(k) plan won't do you a bit of good if you leave the organization before you are fully vested. Some companies offer immediate vesting, but many organizations have a waiting period for vesting. Disclosure is required, so make sure you understand exactly how long you have to stay to realize the benefits from your employer's contributions.

2. Cautions Regarding 401 (k) Loans
Borrowing from your 401 (k) can be very beneficial from time to time. However, did you know that the luxury of being able to borrow your own money can be curtailed if you decide to change jobs? Typically, once you stop working for your employer - for whatever reason - if you have an outstanding 401 (k) loan, you'll have to pay it back immediately in order to avoid having to pay early withdrawal penalties and taxes.

3. Beware of Small Balances
When you leave your job, if your 401 (k) account has a relatively low balance (less than $5,000), it's important that you make plans right away to roll the money over to a new account. Otherwise, the company can opt to cash out your plan, in which case you'll have to deal with tax consequences and a lot of unnecessary headaches.



 
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