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September 09, 2022

The Great Resignation’s Impact on Your Retirement Benefits

Financial Planning
If you are one of the many individuals who quit their job during the great resignation, don’t be one of the estimated 24 million who left their retirement accounts behind.

If you decide to participate in the Great Resignation, make sure you don’t forget about any retirement money you’ve built at your current or previous job.

Switching Jobs — Know Your Options

As more and more individuals embark on new jobs and careers, it’s wise to know your options regarding retirement funds you have earned at your previous job.

Here are four options for your employer plan money:

1. Roll Funds into Your New Employer’s Plan

Regardless of what you decide to do with past earnings, you should begin contributing to your new job’s retirement savings plan as soon as possible. If you choose to roll past funds into your new plan, your new HR department will guide you in facilitating previous dollars into your account with them.

Individuals choose this option to keep all their funds in one place. This helps to track their money and may even help to save on fees.

You should note that you have 60 days to deposit previous funds into a new retirement account without being hit with tax liabilities and other penalties.

2. Roll Funds to an Individual Retirement Account

If you decide to roll your previous 401K into an IRA account, your trusted institution will promptly guide you through the process, as the same 60-day rule also applies to this kind of transfer.

This option may provide a broader range of investment opportunities and growth.

3. Leave Your Funds with Your Former Employer

There are some instances where this may be the best option for you. If you have $5,000 or more in your account, you may consider leaving your money where it is until you can get settled at your new job and acquainted with the investment opportunities there.

If you have less than $5,000 in your account, it’s best to make a plan to move it due to the fact that your previous employer may cash you out of your plan, mail you a check, and leave you scrambling for what to do with it.

Leaving behind a retirement account can cost an individual an estimated $700,000 in forgone retirement funds. These accounts may be poorly allocated and be subject to ongoing fees. If you leave your funds with a previous employer, you must track your account closely and not forget about it.

4. Withdraw the Funds As Cash

Cashing out your retirement funds is an option with its own advantages and disadvantages.

This money can help in times of desperation. While you may use these dollars to keep you afloat between jobs or other challenging circumstances, you may consider not cashing out the entire amount.

You should balance your need for funds by considering some disadvantages, such as missing out on compounding gains, a 10% penalty, taxes on withdrawals, and overall less money for your retirement.

Social Security | Consider Your Benefits

If you are one of the thousands of people resigning from their job consider the impact a period of unemployment may have on your social security benefits.

While you only need ten years of work history to qualify for benefits, your earnings are calculated by averaging your 35 highest-earning years. If you do not have 35 years of work experience, they will replace those years with 0’s, bringing down your average.

Having too many unemployed or low-income periods in your work history may cause you to need to work longer in life to make up for those years.

Your retirement isn’t always top of mind, especially amidst significant life events like a career change. If you have recently switched careers or are planning to make a change soon, know that you have options regarding your retirement funds.

Reach out to a Wealth Advisor to help determine which option is best for you. Stop by a branch or make an appointment today.
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About the Author
daniel wilkes
Daniel Wilkes

Wealth Management by CommunityAmerica

Daniel Wilkes is a Wealth Advisor. Daniel strives to make members feel more confident, farseeing, capable, and prudent in their investing and retirement decisions.

Securities and advisory services offered through Copper Financial Network, LLC (“Copper Financial”), a broker-dealer and SEC registered investment adviser. Member FINRA/SIPC. Copper Financial is a wholly-owned subsidiary of CommunityAmerica Credit Union (“CommunityAmerica”) and makes non-deposit investment products and services available to its members. Representatives are registered with Copper Financial. CommunityAmerica and Wealth Management by CommunityAmerica are not broker-dealers or investment advisers. For important disclosures from Copper Financial please visit here.


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