Take Your Retirement Fund with You
Make sure you ask these questions about your retirement plan before leaving your current job.
November 16, 2005
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Planning a job jump soon? If so, start asking questions and gathering information about your current employer's pension plan and possible new homes for your money. Request investment and IRA information from banks, mutual funds and brokerage firms that are candidates for your rollover IRA business.
You'll want answers to these questions about your retirement plan at work:
Must the payout be in cash or can securities be rolled directly (without being liquidated) into an IRA or other qualified plan? If your employer is a major corporation, and you own company shares in your retirement account, you may want to hold on to those shares. Find out whether shares can be transferred with little or no cost. If taking your money means the stocks must be liquidated, however, you may want to stay put.
Can you leave the money where it is? If your current investments are performing well, and the rules permit you to stay in the plan even if you leave the company, that's an option you'll want to consider. Do some comparison shopping with similar types of investments offered elsewhere before you decide. If the money is in a growth-stock fund, for example, how are other growth-stock funds performing?
How long will it take to complete the payout/transfer process?
What portion of the payout, if any, represents voluntary after-tax contributions that you've made? This portion can't be rolled over into an IRA, but it won't be taxed when you withdraw it.
If your 401(k) money is managed by one of the major fund families, such as T. Rowe Price or Fidelity, and you've been happy with your investments, you may be able to exit your company plan but stay within the fund family. Some fund firms will arrange an inside rollover -- a quickie transfer from your 401(k) into a rollover IRA at the same firm.
From Switching Careers, by Robert K. Otterbourg, Kiplinger Books, 2001