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Retirement savings can roll from job to job

Tracy Tutag and Jeffrey Apps
Vail, CO, Colorado

Americans are on the go, not only in their leisure pursuits, as evidenced in our valley, but in their jobs.

The average American worker switches jobs about every four years, according to the U.S. Department of Labor. If you are preparing to change jobs, do you know what your choices are for managing the money in your company’s retirement plan? Many people choose to take the cash distribution, complete with taxes and penalties. Others assume that their former employer is managing that money for them. With so many people moving into and out of this area, we get questions regarding retirement accounts quite frequently. Here are some options to consider.

Uncle Sam loves a cash distribution! Taking that lump-sum cash distribution may seem tempting but consider that it may trigger an immediate 20 percent federal withholding tax. In addition, a 10 percent federal tax penalty may apply if you are younger than age 55.



If you’re age 55 or older, upon meeting certain requirements, the 10 percent penalty may not apply for lump-sum distributions taken from an employer-sponsored retirement plan. Keep in mind that the 10 percent penalty may be incurred on distributions taken from an IRA prior to age 59.

Taking your money in cash also means that you’ll no longer enjoy the potential benefits of tax deferral that a qualified retirement plan offers.

Participate in The Longevity Project

The Longevity Project is an annual campaign to help educate readers about what it takes to live a long, fulfilling life in our valley. This year Kevin shares his story of hope and celebration of life with his presentation Cracked, Not Broken as we explore the critical and relevant topic of mental health.



Depending on your circumstances, you may have several options to consider that allow you to maintain the tax-deferred status of your retirement plan assets.

1) Leave the money in your former employer’s plan. Most former employers must allow you to leave the money where it is as long as the balance exceeds $5,000. You’ll no longer be able to contribute to the account, but you may still decide how the existing assets are invested if you communicate with their representative.

2) Roll over the money to your new employer’s plan. By “rolling” the money directly to your new plan you will not be subject to the taxes that occur with a cash distribution. You’ll have a consolidated retirement account that will be limited only by the plan provisions of your new employer. Even if you’re not immediately eligible to contribute to the plan at your new job, you may still be able to roll over the money right away.



3) Roll over the money to an IRA. You can “rollover” your retirement money from your former employer(s) directly into a traditional IRA. This does not subject you to taxes or penalties and allows you to choose from a variety of investment options, separate from your former, current or future employers.

Research your options. If you plan to change jobs, you may not want to “take the money and run,” although a new pair of skis or a snowboard might be tempting. Since rules vary from company to company, find time to explore your alternatives. If you have specific questions about your retirement plan distribution options, contact your employer’s benefits coordinator or a qualified financial advisor. If you are between jobs, ask a financial advisor about contributing to a Roth IRA.

Jeffrey Apps and Tracy Tutag provide securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and provide annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached at 926-0601 or tracy.tutag@axa-advisors.com.


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