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Friday, July 11, 2025 at 2:45 AM
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Leaving Your Job? What Happens to Your 401(k)?

Leaving Your Job? What Happens to Your 401(k)?

If you’re in the early stages of your working life – or even in the not-so-early ones – the chances are pretty good that you will change jobs at some point. When that happens, you’ll probably leave a few things behind – but will one of them be your 401(k)? Of course, you wouldn’t really forget about your 401(k). (It does happen, however – over the period from 2004 through 2013, more than 25 million people left at least one 401(k) or similar plan behind when they left their job, according to the U.S. Government Accountability Office.) But you will have to do something with your account. Essentially, you have four choices:

  • You can cash out your 401(k). It’s your money, but if you take it out before you reach 59 ½, you will owe federal income taxes, plus any applicable state and local taxes.
  • Also, you will likely be charged a 10% penalty for early withdrawal. Perhaps even more important, if you liquidate your 401(k) when you change jobs, you’ll be reducing the amount you’ll have left for retirement.
  • You can leave your 401(k) with your old employer. If your former employer permits it, you can leave your 401(k) intact, even after you move to a different job. This might be appealing to you if you like the investment choices in your account, but you won’t be able to make any new contributions. Plus, you won’t face any immediate tax consequences.
  • You can move the money to your new employer’s 401(k). You can consolidate your old 401(k) with one offered by your new employer, if allowed. You won’t take a tax hit, and you might like your new plan’s investment options. And you may find it easier to manage your funds if they’re all held in one place.
  • You can roll your 401(k) into an IRA. You don’t need the permission from any employer – old or new – to move your old 401(k) to an IRA. Your money will continue to grow on a tax-deferred basis, and an IRA offers you a virtually unlimited array of investment options – stocks, bonds, mutual funds and so on. You can make either a direct or indirect rollover. With a direct rollover, the administrator of your old 401(k) sends your money directly to the financial provider that holds your rollover IRA. No tax is withheld because you never actually take possession of the money. With an indirect rollover, you’re technically withdrawing the money and moving it to the IRA provider yourself. (You’ve got 60 days to make this transfer.) You will face a withholding of 20% of your account’s assets, but you may be able to recover most of this amount when you file your tax return. Still, for the sake of ease of movement and avoidance of all tax issues, a direct rollover may be more advantageous.

Which of these options is right for you? There’s no one “right” answer for everyone. You’ll have to consider several factors, and you’ll certainly want to consult your tax professional before making any decision. But in any case, do whatever you can to preserve – and hopefully grow – your 401(k) assets. You’ll need these resources to help fund the retirement lifestyle you want and deserve. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.     Read more local news – return to the home page at www.thefallonpost.org/ Support your local news source, make a contribution today. www.thefallonpost.org/support-our-work/

   


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Comment author: Mike HinzComment text: I knew Sam as a member of our church growing up. He always had a warm smile, a kind word, and a great sense of humor! He will be great missed!Comment publication date: 7/2/25, 11:57 AMComment source: Obituary -- Samuel Bruce WickizerComment author: Mike HinzComment text: Great teacher, great coach, but even a better person!!! Rest in peace Mr. BeachComment publication date: 7/2/25, 11:53 AMComment source: Obituary -- Jack Victor Beach, Jr.Comment author: Mike HinzComment text: I had Mrs Hedges for First Grade at Northside Elementary in 1969. I still, to this day, remember her as a wonderful teacher…one of my favorites!!Comment publication date: 7/2/25, 11:29 AMComment source: Obituary - Nancy Marie Hedges C Comment author: Carl C. HagenComment text: What are MFNs and PBMs ?? ............................ From the editor: This is a very good question and we apologize for not catching that wasn't in there. We reached out to the writer/submitter and got this info back...hope it's helpful. PBM: Pharmacy Benefit Managers are pharmacies that are owned by insurance companies. (CVS is one.) They negotiate with drug makers to get reduced pricing for medications, but they historically have not passed along those savings to patients. https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf MFN: Most Favored Nation pricing is a policy that means a country agrees to offer the same trade concessions (like tariffs or price reductions) to all member nations of the World Trade Organization (WTO). When applied to pharmaceuticals, it could disrupt global access, deter innovation, and obscure the deeper systemic issues in American health care. https://petrieflom.law.harvard.edu/2025/05/22/the-global-risks-of-americas-most-favored-nation-drug-pricing-policy/Comment publication date: 6/23/25, 7:47 AMComment source: L E T T E R TO THE EDITOR
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