Articles

Don’t Forget Retirement Savings When Changing Jobs by Sean Deviney, CFP


Posted on February 05, 2015 by Richard Berkowitz

It is far too common for individuals to leave behind retirement benefits with previous employers when they change jobs.   By forgetting and neglecting these orphaned benefit plans, individuals risk losing significant savings they accumulated over their hard-working years.  In fact, a recent report issued by the Government Accountability Office found that, under current law, each year more than $1.5 billion in workers’ savings are forced from employer-sponsored retirement plans into conservative, low-yield investments that often generate more management fees than investor returns.

 

Rather than leaving retirement savings unmonitored, unmanaged and possibly subject to a forced transfer, workers should track down forgotten accounts and consider the following strategies to maximize their investments over the long-term.

 

Roll Over to a New Plan.  Many businesses allow employees to roll the savings from previous 401(k) plans into the new employers’ plan.  By consolidating retirement accounts, workers will find it much easier to manage and monitor their savings and ensure they are on track to meet their retirement goals.

 

Roll Over to an IRA.  A direct roll-over into an Individual Retirement Account (IRA) enables individuals to preserve the tax benefits of their savings.  This strategy provides individuals the flexibility to rebalance their portfolios to meet their changing circumstances and needs as they get closer to retirement age.

 

Leave Savings with Previous Employer.  There are times when workers will find that the retirement plans with their prior employers offer a greater choice of investing options, better planning tools and/or lower fees than those provided by a new employer.  In these situations, employees should weigh the pros and cons of both plans, and, if they opt to leave their savings with their previous employers, take an active role in monitoring and directing the investments in the future.

 

Investors do have options when deciding what to do with employer-sponsored retirement plans when they leave a job.  Each requires careful consideration of the individual’s unique circumstances and an honest assessment of his or her discipline and diligence to continuously monitor and manage their investments.  The one decision an individual should almost never make is to cash out their retirement account. The taxes and potential penalties of a cash withdraw are great for Uncle Sam but terrible for individual investors.

 

About the Author: Sean Deviney, CFP, is a financial advisor and retirement plan specialist with Provenance Wealth Advisors, an independent financial services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants.  For more information, call (954) 712-8888 or email info@provwealth.com.

 

Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Securities offered through Raymond James Financial Services, Inc., Members FINRA/SIPC. Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants.