Personal Finance Essentials

Managing Retirement Accounts Through Life Changes

Changing Jobs? Getting Divorced? Caring for a Parent?

Each One Is a Hidden Threat to Your Retirement

Retirement Threats

Changing Jobs

When you leave a company, do not leave your retirement money behind. Old accounts often sit dormant in former employers’ plans for years – even decades. Moving your balance into an IRA when you leave a job gives you more investment choices, better control and greater ease of access. Done correctly, there are no fees or taxes due on the transfer.

Job-hopping can also disrupt retirement plan participation and forfeit employer matches during vesting periods. One analysis compared two workers who both retired at 65: one had changed jobs every five years and earned a significantly higher salary; the other had stayed with one employer her entire career. Despite the lower salary, the loyal employee had accumulated nearly $50,000 more in her 401(k). Consistency in contributing matters.

Borrowing from Your Plan

Never borrow from your retirement plan. If you have already made this mistake, repay the money immediately – even if you must borrow elsewhere to do it. If you are laid off, you will have 30 to 90 days to repay the loan or face income taxes and IRS penalties on the unpaid balance.

Divorce

Never divide retirement plan assets during a divorce without a court order. A Qualified Domestic Relations Order (QDRO) is required to divide 401(k) and other workplace plan assets without triggering immediate taxes and penalties. Skipping this step can be extremely costly.

The Sandwich Generation

Twenty million Americans are simultaneously caring for aging parents and their own children while managing careers and trying to fund retirement. Caregivers often suffer reductions in income, damage to their careers and impairments to their own health. The financial impact can severely disrupt retirement savings. Planning ahead for this possibility – including researching long-term care insurance and having honest family conversations about elder care costs – is essential.