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FINANCIAL SERVICES: Say goodbye to your old job, not your retirement savings

Leaving an employer shouldn’t mean leaving your savings behind

Chris Cravens, Coffee Financial

Chris Cravens, Coffee Financial

After months of sending out resumes, dreaming of bigger and better things, you finally landed a new job. Congratulations! You’ve taken charge of your career. The question is, are you still in control of your retirement?

Leaving a job, whether for a new one or even retirement, gives you a lot to think about. One of those things should be the retirement savings that have been building in the background over the course of your career.

(Click here to contact Chris Cravens at Coffee Financial.)

Let’s take a look at what you can do with that old employer-sponsored retirement plan after you bid your coworkers farewell. These same ideas should apply even if your job change came as a result of retirement, a move or something else beyond your control.

Learn to roll over

One of the main benefits of investing in your employer-sponsored retirement savings plan was the employer match that allowed you to maximize contributions and grow your portfolio through market appreciation. However, once you leave, that benefit goes away. You now have options to move those assets into an account that may offer different benefits. For example, you could move funds from eligible defined-contribution plans to traditional IRAs, Roth IRAs, 401(k) s, 403(b)s and other plans, depending on your needs. (To see the pros and cons of some of these options, consult the table printed in next month’s insider column.) For our purposes, let’s look at things you might want to consider when consolidating assets into a traditional IRA.

Benefits of an IRA Investment Choices

 It’s likely your employer-sponsored plan gave you predetermined investment options. An IRA might be a better choice to grow your retirement portfolio, in part because it offers expanded investment options. You and your advisor may select from any number of stocks, bonds, CDs, REITs, mutual funds, alternative investments and more.

Better Risk/Reward Profile

Even if you’re happy with your previous plan choices, you may be able to invest in the exact same holdings in an IRA and change your allocations over time in response to market conditions or your personal situation. Simply put, you can customize your retirement savings to help you meet your financial goals.

Potentially Lower Fees

Consolidating retirement assets also can eliminate redundant maintenance and management fees. By leaving assets in former employer plans or spreading them across multiple IRAs, you could be paying fees to each company for doing essentially the same thing. Some 401(k) plans even charge higher maintenance fees on accounts of former employees.

Other Perks

Consolidating your assets also makes it that much easier to track progress toward your goals, make more accurate asset-allocation decisions and calculate required minimum distributions. Plus, with an IRA, you can seek guidance from your own financial advisor-who knows and understands your family’s needs.

Flexible Beneficiaries

Perhaps most important, you’ll have more flexibility when it comes to your beneficiaries. Many 401(k)s don’t allow you to name anyone but your spouse, and many don’t allow multiple beneficiaries. On the other hand, a traditional IRA offers flexibility when it comes to naming heirs.

Stretching Your Legacy

You can even skip generations when designating beneficiaries, which means your loved ones can spread distributions over a longer time frame. Some call this a “stretch IRA,” which could allow your legacy to continue growing tax deferred and minimize taxes owed.

Get Help

Deciding if an IRA rollover makes sense for you can be complicated. Your individual circumstances may dictate additional considerations; say if you need to access some of these funds immediately. It’s best to consult with your financial advisor and tax professional about the advantages of consolidating your retirement assets before making any decisions.

Baby boomers, on average, change jobs 11 times over the course of their working careers and could be leaving behind multiple retirement plan balances as a result.

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