Laid-off workers have options for retirement funds

So you’ve lost your job. Now what do you do with your 401(k) or saved-up pension dollars?

Greg Menges of Boston Independent Advisors has a few suggestions:

The first thing to do is contact your plan administrator and find out what the rules are. A company must have an exit plan for anyone with a 401(k) who gets laid off. All retirement plans are highly regulated to protect you, but some practical things to consider:

  • Ask how long can you keep your 401(k) in your company’s plan after you leave.
  • If your company matches your contributions, ask how much of your money is vested.
  • If you aren’t fully vested some of the balance may stay with the company.
  • Federal law says if you have less than $5,000 in your account the company must cut you a check. If you don’t want to face huge tax consequences, you have 60 days to get your money into an Individual Retirement Plan (IRA) or, if you get a new job, you may be able to roll the money into your new company’s 401(k) program.
  • Instead of cashing out and taking a taxing check, you can also ask your plan administrator to roll your money over into an IRA of your choice.

US News and World Report has a few tips, too, including looking for good investment options like IRAs, rolling the funds over, and avoiding the temptation to cash out your funds and run with the money. Doing so could cost you in taxes and penalties.

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