If you are in a defined contribution plan (such as a 401(k) plan ), in most cases you will be able to transfer your account balance out of your employer’s plan under one of the following options.
- A rollover to another retirement plan – you can ask your employer to transfer your account balance directly to your new employer’s plan if it accepts such transfers.
- A rollover to an IRA – you can ask your employer to transfer your account balance directly to an individual retirement account (IRA). [See Can I Roll Over My Retirement Account? ]
- A lump sum – you can choose to receive your benefits as a single payment from your plan, effectively cashing out your account. You may need to pay income taxes on the amount you receive, and possibly a penalty.
- If your account balance is less than $5,000 when you leave the employer, the plan can make an immediate distribution without your consent. If this distribution is more than $1,000, the plan must automatically roll the funds into an IRA it selects, unless you elect to receive a lump sum payment or to roll it over into an IRA you choose.
If you are in a defined benefit plan (a plan in which you receive a fixed, pre-established benefit), your benefits begin at retirement age. These types of plans are less likely to allow you to receive your money early. Keep current on any changes the company makes, including changes of address, employer name, or mergers and give the plan any changes to your contact information.
[For additional information see Protecting Retirement Assets after Job Loss]
Consult your employer and/or a financial professional who specializes in employee benefits for guidance regarding your specific situation.