The coronavirus has caused many companies to furlough and lay off employees. If you have recently lost your job and had a 401K, there are important financial considerations you should be aware of. Unexpectedly losing your job is never easy. Therefore, it can be particularly hard on older workers, especially if you were planning for retirement. You may be rethinking your retirement plan. As a result, you may wonder what to do to protect yourself financially. Your 401(k) is likely an important part of your retirement plan. As a result, it’s important to know what to do with it after you’ve left your job.
This Guide Will Cover:
- Options for your 401(k)
- What to do with company stock
- How to take advantage of the CARES Act 401(k) and IRA provisions
- How to address immediate concerns if you’ve been laid off or furloughed
- A potential Social Security claiming strategy for those who have lost their jobs
- Ways to minimize your taxes
If you leave a job for any reason, you have a few options for your old 401(k):
- Cash out: You can cash out all or part of your old 401(k), in which case the funds will be taxed as ordinary income.
- Rollover into a new 401(k): If you start another job, your old 401(k) can often be rolled over into your new workplace retirement plan without paying tax on funds rolled directly into your new401(k).
- Continue with the old 401(k): In many cases, you can leave your money in the 401(k) at your old workplace. However, having multiple retirement accounts can complicate your finances. And your retirement fund will still be at your ex-company.
- Rollover into an IRA: If you roll over funds directly into an IRA, you will not owe tax on them. IRAs typically offer many more investment options than workplace 401(k) plans, giving you more flexibility to pursue an investment strategy that suits you specifically.