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Few life events are more stressful than a job loss, but becoming unemployed during a pandemic brings that stress to a new level. If you or someone you know is in this situation due to COVID-19, you’ll likely have several questions about job hunting, unemployment insurance, and health care. You may also be wondering, “What should I do with my 401(k)?”
People leaving an employer typically have four options with their 401(k) retirement plan, but it’s not an all-or-nothing decision. Depending on your situation, it may be possible to engage in a combination of these options:
—Leave the money in your former employer’s plan, if permitted.
—Roll the assets over to your new employer’s plan, if one is available and rollovers are permitted.
—Roll the assets over to an Individual Retirement Account (IRA).
—Cash out the account value.
Each choice offers advantages and disadvantages. If you are uncertain what accruing to take with your retirement accounts, please reach out to your financial advisor.
You may also have heard that the CARES Act waives the 10% early withdrawal penalties on 401(k) plans. This gives some account owners up to three years to replace what they took out. Remember, this new legislation may not cover loans unrelated to the COVID-19 crisis. If you have questions about what rules apply, you may want to get in touch with your former employer’s Human Resources team.
To decide which option is best for you, have a conversation with your financial professional. They can help you understand what the choices mean for your financial life and can help you stay on course for your long-term goals.