If you’re heading to a new job, don’t forget about your 401(k): Here's how to handle the money in an ex-employer's plan

If you're heading to a new job, don't forget about your 401(k): Here's how to handle the money in an ex-employer's plan  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  VIEW IN BROWSER | SUBSCRIBE WED, JUL 13, 2022 YOUR WEALTH Editor's Note Have you decided that it's time to change jobs? If the answer is yes and you have a 401(k) plan or a qualified retirement savings account through your employer, it's important to know what happens to those funds when you leave your old job. For many, deciding what to do with your retirement savings from a former employer can seem daunting. However, it's worth exploring your options to find the best solution for you. You do have several choices in terms of what to do with your retirement savings after you leave a company. Each option comes with various pros and cons. So it makes sense to do some homework and find out which option makes the most sense for your financial situation. You can simply keep your retirement savings with your former employer. It's hands-free and the previous employer will continue to administer the management of the 401(k) plan. Though it seems like the easiest, many financial experts say it's not always the best choice for everyone. Another option is to move your 401(k) funds to a traditional individual retirement account, where it would continue to be tax-deferred. A third option is to move your 401(k) from your previous employer's 401(k) to the new employer's plan. There is actually a fourth option (while tempting, it's highly discouraged): cashing out your 401(k) savings. "Cashing out is a very bad idea," an advisor told me. You can cash out the funds from your previous 401(k) by distributing the funds directly to you. However, the distribution would be subject to a mandatory 20% federal income tax withholding on any taxable amount. Also, the distribution is subject to a 10% IRS early distribution penalty if you are under 59½ and do not qualify for an exception. Not to mention, you could be missing out on tax-deferred growth of your retirement assets. The bottom line. The IRS does not suspend its rules on early withdrawals when you leave one job for another. If you cash out your 401(k), you have 60 days to put that money into another qualified retirement account or else penalties and taxes will apply. For more cool stuff like this, be sure to visit CNBC's Financial Advisor Hub and Personal Finance section. Jim Pavia Money Editor @JIMPAVIA If you're heading to a new job, don't forget about your 401(k): Here's how to handle the money in an ex-employer's plan Although not all workers have a 401(k) plan, those who do should be sure to know their options for that money when they leave a company. 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