Your Options When Leaving a Job with a Qualified Retirement Plan

Your Options When Leaving a Job with a Qualified Retirement Plan
Sarah Bomhoff, CFA, CIPM
March 6, 2023
Wealth Management

Retiring can be stressful. Even more stressful can be a situation in which you’ve just left a job that offered a qualified retirement plan like a 401(k), a 403(b), or a pension plan. These life events come with a lot of decisions you’ve got to make. Potentially rolling over your qualified retirement plan into an IRA or a new employer’s retirement plan is one of those important financial decisions, with several factors you’ll need to consider. In the next three blog posts, we’ll discuss the options available to you.

When you leave a job, for one reason or another, that had a qualified retirement plan, you’ve got several options of what to do with those retirement savings.

I was personally faced with this decision about six months ago. As I was leaving a job in Austin, Texas, I thought through my options of what to do with my retirement savings. In weighing these options, I asked Sarah Bomhoff on our team what she would advise I do, as she encountered a similar situation years before. She also was previously working at an investments firm, so I figured our scenarios were alike enough where I would reach the same decision as she had. I was wrong.

The fact of the matter is that the average American works at twelve jobs in his or her career. Gone are the days where you can expect to work at the same firm your entire career, climbing the ladder until you sit atop the food chain. The new normal is to change jobs about every four years. Thus, it was similar that Sarah had changed jobs but not too similar. In fact, there were a lot of factors that would weigh into my decision, ranging from the relative fees associated with each option to the less tangible mental complexity of each option. After careful consideration, I ended up making a different decision than Sarah had on what we should do with these savings. I’d argue that we both made the right decision given our circumstances, which are so important to weigh before making these choices. The frustrating part of this decision is that the more you know about and have researched all these factors, the harder this choice actually becomes.

The question of where to go with our retirement savings in the event of a job ending is a tough one. There are lots of different types of accounts and there are many options on the table. There just is not a silver bullet here. There is no one-size-fits-all answer. The good news is that this isn’t a decision you need to make alone. Working with an investment advisor, especially one who is a fiduciary and has a duty to always act in your best interests, can be extraordinarily helpful in situations like these. It will give you a lot of peace of mind to be working with someone whose goal is to help you get to and through retirement.

This will be the beginning of a careful framework for making such an important decision as this. We’ll consider each of our options in the next three blog posts, while weighing the pros and cons of each and when each makes the most sense.

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Your Options When Leaving a Job with a Qualified Retirement Plan

Sarah leads our investment committee to shape our investment choices and manages our portfolios.