The absolute worst thing you can do to an existing retirement account after starting a new job is withdraw the money.
Anyone under the age of 59 1/2 gets popped with a 10% penalty right off the bat, with the added bonus of having to pay taxes on it.
The wisest option?
Either let it stay put (most employers allow this) or roll your savings over into a new account. Either way, you can’t keep contributing to your former employer’s 401(k) once you’ve left the company, so we’re fans of the latter option.
But before you make a move, there’s one key consideration to make: Are you vested yet?
“Any money that you contribute is always 100% vested –– meaning it’s yours to take with you. The money your employer has contributed on your behalf through a matching program, though, is not always 100% vested. Many plans require that you work for a company for a certain amount of time before the match portion is completely vested. It’s common for you to need to work at least five years to be fully vested.”
Sometimes, you may not be willing to stick around another year or two just to get 100% of your employer’s match, but if it’s a matter of weeks or even a few months before you’ve reached complete vesting status, it may be worth it to wait it out.
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