When you leave your job, you have several options for what you can do with your retirement plan at your former employer.
Depending on the rules of your employer's plan:
- You may be able to rollover your retirement plan to a new employer’s plan (make sure to check that your current employer’s plan allows you to make a rollover from another plan)
- Rollover your retirement plan to an individual retirement account (IRA)
- Cash out your retirement plan
- or leave your retirement plan (if under $7,000, the former employer may not allow this option).
If you cash out your retirement account, there will be a 10% IRS penalty if you are under age 59 ½, and there will be a 20% mandatory federal tax withholding as well as possible state tax. If your funds roll into another qualified retirement account, you will not be subject to those taxes and penalties. Other fees and taxes may apply. Please make sure to speak with a Tax Consultant for your individual tax situation.