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Planning Strategies

Retirement: Planning Strategies: Changing Jobs

A rollover IRA can help you stay in control of your retirement plan assets:

If you're changing jobs, and if you have money in your former employer's retirement plan, it's likely you'll have to make some important decisions about what to do with the money you've worked so hard to save.

Knowing Your Options

Essentially, there are four things you can do with your retirement plan assets.

  1. Roll the money over to an IRA.
  2. Leave your money in the former employer's plan.
  3. Roll the money into a new employer's plan.
  4. Cash out of the plan.

Evaluating Each Option

  • Option 1: Roll the money over to an IRA
    Rolling your retirement assets into an IRA provides you with added flexibility not always found in an employer-sponsored retirement plan. You may have access to more investment options along with the opportunity to make IRA contributions to the account. Or, if eligible and appropriate for your tax situation, convert the account to a Roth IRA.

    Finally, with an IRA, you have portability. This means that you can take your retirement account with you no matter what job changes you make now or in the future.

  • Option 2: Leave your money in the former employer's plan
    The first thing you should know is that if you have an account balance of less than $5,000, the Internal Revenue Code says your former employer has the right to cash you out of the plan. If you have $5,000 or less in the plan, it's important to understand your former employer's intentions regarding the account.

    If remaining in your former employer's retirement plan is allowed, carefully review the plan's investment options. You'll need to determine whether or not this range of investment options meets your retirement planning needs. Also consider whether the plan's fees are reasonable and appropriate for your situation.

  • Option 3: Roll the money into a new employer's plan
    If you begin a new job and find that your new employer has a solid retirement plan with a good mix of investment choices, this may be an appropriate option. A rollover to a new employer-sponsored plan can help you continue tax-deferred retirement savings, one-statement planning, and access to 401(k) loans if applicable.
  • Option 4: Cash out of the plan
    Sure, you can cash out and take the money, but consider that you could lose up to 50 percent of your retirement savings to taxes and penalties, and the money won't be there when you retire.

Taking the Next Step

Contact your financial professional to help evaluate your options.
Your financial professional can develop a personalized strategy that gives you an edge with retirement planning products and solutions from The Principal®.



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While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. For more information about our funds, including their full names, please see the Principal Funds, Inc. prospectus or call Sales Support at 1.800.787.1621.

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