Managing Retirement Plan Savings When Leaving a Job

If you have been displaced or are changing jobs or retiring, one of the most important decisions you may face is how to handle the savings you’ve accumulated in your qualified employer-sponsored retirement plan (QRP), such as a 401(k), 403(b), or governmental 457(b).

Choosing an appropriate strategy can help minimize taxes and make the most of your savings. You generally have four options:

• Roll over your assets into an Individual Retirement Account (IRA)
• Leave your assets in your former employer’s QRP, if the plan allows
• Move your assets directly to your current or new employer’s QRP, if the plan allows
• Take your money out and pay the associated taxes

Each of these options has advantages and disadvantages, and the one that is best depends on your individual circumstances. You should consider features, such as investment choices, fees and expenses, and services offered. A Wells Fargo Advisors Financial Advisor can help educate you regarding your choices so you can decide which one makes the most sense for your specific situation. Before you make a decision, read on to become more informed and speak with your retirement plan administrator and tax professional.

Rolling your retirement savings directly into an IRA allows your assets to continue their tax-advantaged status and growth potential, the same as in your employer’s plan. In addition, an IRA often gives you access to investment advice and more investment options than are typically available in an employer’s plan.

While this approach requires nothing of you in the short term, managing multiple retirement accounts at different financial institutions and with former employers can be cumbersome and confusing in the long run. And you will continue to be subject to the rules of each QRP regarding investment choices, distribution options, and loan availability.

If you’re joining a different company, moving your retirement savings directly into your new employer’s QRP may be an option. This may be appropriate if you want to keep your retirement savings in one account and you’re satisfied with the investment choices the new plan offers. This alternative shares many features and considerations of leaving your money with your former employer.

You should carefully consider all the financial consequences before distributing your QRP savings. The impact will vary depending on your age and tax situation. If you absolutely must access the money, you may want to consider distributing only what you need until you can find other sources of cash.

• Learn about your choices before taking a distribution.
• Pay special attention to additional taxes and fees associated with each possible action.
• Contact your financial advisor and other professionals if you have questions about how to proceed with the QRP distribution option you select.

Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.