Suppose you’re switching jobs if you were furloughed because of the pandemic or you’re simply searching for greener pastures. If you have a 401(k) from your soon-to-be former employer, you must decide what to do with your retirement account when you leave. Here are your four options:
So which of these options should you choose? Here are some things to consider as you think about what to do with your 401(k) account:
Borrow the money. If you want to borrow money from your retirement account in the future, you’ll want to roll the money into another 401(k). While you can borrow money out of your 401(k), that option is not allowed with an IRA.
Take the money. When you make an early withdrawal from a retirement account, you owe income taxes on the amount of the distribution. You may also be subject to a 10% early withdrawal penalty.
Invest the money. This is why you started contributing to a 401(k) account, right? While it might be tempting to borrow or take an early distribution from your retirement account, you’ll also be depleting future earnings. So you consider whether you truly need the money now to pay for an emergency or if you’re ok leaving it alone in your 401(k).
Last updated: 10/04/2023
The Covid-19 Tax Resource Portal (herein after referred to as "Site") is made available as a service to our clients and others for informational purposes only. These materials and information should not be considered as, or a substitute for, accounting, tax or financial advice. While it is hoped the materials provided here are helpful as background material, it is not warranted either expressly or implied as accurate or complete. You should refrain in taking any action based upon the information provided here until you have received proper counsel.
In addition, you understand that any links to any other web site or services does not constitute endorsement of or warranty of any service, product or information provided on their site(s). These links are provided for convenience only.
While our intent is to make transmissions to and from this web site secure, it is understood that no warranty of security can be made and that unforeseen security breaches by "hackers" is a possibility, however slight.
Reproduction of part or all of the contents on this site in any form is prohibited other than for individual use only. All content on this site is copyright protected and/or trademarked as appropriate and may not be copied, duplicated or altered in any way.
In no event shall Edith I Christian CPA Sc, its affiliates or suppliers of any content on this site be liable for any indirect, incidental, special, punitive damages or consequential damages of any kind, or any damages whatsoever arising out of or related to your use of the Site, the content and other information obtained therein.
© 2020 - 2024. All Rights Reserved.