Your Options when Leaving a Job with a Qualified Retirement Plan: Option 2 – Rolling the Assets Over into the Plan of a New Employer

This is a continuation of our previous blog post about the options available to you when leaving a job that had a qualified retirement plan, like a 401(k) or a 403(b) or a pension plan. Today, we’ll be exploring the pros and cons of the second option on the table—to roll the qualified savings into a new employer’s plan..

Your second option is to roll your savings over into the 401(k)-retirement plan of a new employer.

Obviously, this option is only available in the instance you’ve quit or been let go from your old job and are starting a new one. The pros and cons of this strategy all come down to the investment lineup available and the fee structure of the two plans comparatively.

When It Makes Sense:

Let’s assume the new plan has investment options available that better suit you than the old plan does. You may be more comfortable with your new chosen investment strategy than you were in the old plan. In that case, it could make sense to roll the assets in your former employer’s plan into the plan of your new employer.

Additionally, it is quite possible that your new employer’s qualified plan has a more competitive fee structure. This can be broken down into two components. The first is that the investments themselves are more competitively priced. The second is that perhaps the administrative costs of the plan are lower priced. These two components add up to the true cost, and these bits of information can be obtained from your former and new employers.

Finally, you can simplify by making contributions from your earned income into your new qualified plan, having all your retirement savings held within this one account.

When It Doesn’t:

Let’s assume the exact opposite of the above. Maybe your old qualified plan actually has a more attractive universe of possible investments. Perhaps the fee structure is actually more competitive at the former employer’s plan than at this new employer’s plan. The consideration of these two could persuade you not to roll your savings over into a new qualified plan.

Weighing these factors alone can be daunting! We work with individuals at these crossroads of their professional lives regularly to make the best decision for their money.

Stay tuned for my discussion around the final option of rolling into an IRA.

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