ement savings vehicle in your 401(k) plan, which offers various investment options and the chance to accumulate tax-deferred earnings.
But if you leave your job before you retire, what should you do with your 401(k)?
You have several choices — and it’s important that you un-derstand them, because your decision can great-ly affect the resources you’ll ultimately have available during your retirement years.
Here are the main op-tions for dealing with your 401(k) from a pre-vious employer:
You could leave the money in the company’s plan. Not all companies offer this option, but many do. If you like the invest-ment choices available in your plan, leaving the money alone may not be a bad idea — you know where your money is going, and you can still ben-efit from potential tax-deferred growth. On the other hand, since you won’t be employed by the company, you might find it harder to keep up with changes to your 401(k), such as when investment options are added or dropped. Also, you no longer will receive your em-ployer’s matching contribution, if one had been offered.
You could move the money into your new employer’s plan. If your new employer has a 401(k) and allows transfers, you could roll the money from your old plan into the new one. This might be an attractive op-tion if you like the investment options offered in your new employer’s plan. And it will give you a head start in building resources in the new plan.
You could roll the money into an IRA. You may find sev-eral advantages to rolling your 401(k) into an IRA. First, your money will still have the poten-tial to grow on a tax-deferred basis. Second, you can put your funds in virtually any invest-ment you choose — stocks, bonds, mutual funds, govern-ment securities, certificates of deposit and others — so you can build a mix of investments appropriate for your goals and risk tolerance. Third, if you own multiple 401(k) accounts, you might benefit from consoli-dating them into a single IRA, making it easier to allocate and monitor your retirement assets. Plus, with a consolidated ac-count, you may find it easier to track your withdrawals, when it’s time to start taking them.
If you do decide to move your 401(k) to an IRA, make sure to request a direct rollover. The money will be sent directly to the institution that holds the IRA and no taxes will be withheld.
You could cash out your plan. If you cash out your plan, your company likely will pay you 80% of your account value, withholding the rest for federal taxes. And if you’re younger than 59-1/2, you also may face a 10% penalty tax. Furthermore, you’ll have lost a key source of your retirement income. Of course, if you absolutely need the money, it’s there for you.
Before making any moves with your 401(k), consult with your tax and financial profes-sionals. You worked hard to build your 401(k) — so you’ll want to do all you can to keep it working hard for you.

Please contact Ernest Martinez at
210-354-4915 if you have any questions.