When you change employers, regulations allow you to keep investing 401(k) savings tax-deferred, as long as you don’t simply cash out. Cashing out can trigger penalties, as well as losing out on the benefit of tax-deferred growth potential on pre-tax earnings.

Generally, if you withdraw money from your 401(k) account before age 59 1/2, you must pay a 10% early withdrawal penalty, in addition to income tax, on the distribution. 

You commonly have three other options for handling your 401(k) when you leave your job:

1) If permitted, you can leave the funds in your former employer’s plan

2) Roll over the funds to your new employer’s plan (if one is available and if rollovers are permitted),

3) Roll them over into an Individual Retirement Account. 

We can talk through these options with you and help you make an informed decision.