401(k)s & IRAs For Dummies

Chapter 7

Weighing Your Options When You Leave Your Employer

IN THIS CHAPTER

Moving your money to your new job

Taking taxes into consideration

Letting your money stay when you go

Giving yourself a big goodbye present

Handling company stock

When you stop working at the employer that sponsors your 401(k) plan, some restrictions on your money magically drop away. Except in a few extreme cases, you’re allowed to withdraw your money for any reason at all (it doesn’t have to be a hardship), although you still have to pay applicable taxes and penalties.

This newfound freedom makes about a third of 401(k) participants giddy enough to do something silly — that is, take the money and run. That’s a bad idea, and I tell you why later in the chapter. Fortunately, there’s an easy way to avoid pillaging your 401(k) — do a rollover. You can transfer your 401(k) money directly from your former employer to an individual retirement arrangement (IRA) — also referred to as an individual retirement account ...