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Bottom Line Up Front

  • When life changes happen, you can make investment decisions that will help you meet your retirement goals. 
  • When you switch jobs, you have a few different options to consider in regards to your retirement plan. You can cash it out or roll it into your new employer’s retirement plan. 

Time to Read

5 minutes

May 12, 2022

From changing careers to having children, life changes can impact your retirement income. But there are investment strategies and financial planning tools that will help you build a nest egg and reach your retirement savings goals.

Changing Jobs: What to Do With Employer Retirement Savings Plans

When you're making a career change, remember to bring your retirement plan savings along. Here's a look at what you can do with your retirement savings plan money when you change jobs:

  • Option 1: Cash it out. Cash withdrawals are tempting but also costly. You'll receive the money now, but only get part of your balance, as you'll owe taxes at your current income tax rate along with a 10 percent penalty if you're younger than age 55. While this hit may seem small if your balance is low, you also lose out on the benefits of future compounding growth. 
  • Option 2: Keep it in your former employer's plan. If you're happy with the plan's options and fees, and don't mind tracking multiple accounts, keeping your money where it is might work. (If your account is under a certain dollar amount, your former employer may not let you keep it.) However, you won't be able to make additional contributions to this account.
  • Option 3: Roll it into an IRA. Consolidating accounts with one financial institution can make it easier to manage savings. You'll also avoid your employer’s plan distribution rules. If you choose this option, a direct rollover—where your plan transfers the balance directly to your IRA or Roth IRA—is usually easiest and won't incur taxes or withholding.
  • Option 4: Roll it into your new employer's plan. Consider rolling the funds into your new employer’s plan. Not all plans allow rollovers, so check with the new plan's administrator. Consider fees and investment options available, too.

Consolidating Accounts: IRA Transfers and Rollovers

If you have accounts at multiple banks, it can make managing savings more difficult. Consolidating accounts (specifically IRAs) may reduce investment fees and maximize returns. Transfers and rollovers are best for consolidating IRAs. Look at your needs to decide which is best.


An IRA transfer is the movement of funds between the same types of accounts with no withdrawal. So you could move money from one traditional IRA to another.

A direct transfer is the easiest way to move assets between IRAs. The transaction is neither taxable nor reportable to the IRS and is completed by the distributing and receiving financial organizations.


IRA rollovers are the movement of funds between any type of retirement account into an IRA. They can be done directly or indirectly.

With a direct rollover, you roll retirement savings from an employer-sponsored retirement plan directly to an IRA. You'll avoid mandatory 20 percent income tax withholding and any IRS early distribution penalty, although investment surrender fees may apply.

An indirect rollover is a tax-free distribution of all or part of your retirement plan. Since you get the IRA money, the movement is reportable to the IRS, and your employer will withhold 20 percent for taxes. That will be returned at tax time if you make a rollover of the full amount (including the 20 percent withheld) within 60 days.

Marriage and Divorce

When you get married, a good rule of thumb is to discuss financial goals with your partner. Focus on financial goals at different stages in life (especially retirement) and remember to update beneficiaries.

IRAs are an effective way for couples to save for retirement. Each spouse must have their own IRA to receive contributions—you can't have a “joint” IRA. Even if only one spouse earns income, deposits can be made into each IRA if these requirements are met:

  • You’re married and file a joint federal tax return.
  • You or your spouse have income to cover the contribution amount.

Impact of Divorce

If you’re getting divorced, update the beneficiaries on your accounts, especially employer-sponsored retirement plans and IRAs. Beneficiary designations generally override will instructions. So, even if you update your will, if you forget to update beneficiaries, your wishes may not be followed.

Also note that a spouse may be legally entitled to a portion of retirement plan money, so consult an attorney about the division of financial assets in a divorce.

Children: Adjusting Budgets

Having kids can be expensive. A 2021 report from U.S. News & World Report estimates it costs about $267,000 to raise a child to age 18. 

Continue saving for retirement even as your family expands. Adjust your budget to fit your family. You may have to cut back on retirement savings, but don't stop. And think twice before using retirement funds to pay for college. Children can get loans and other help to pay for college—retirement loans don’t exist. Also remember to update beneficiary designations and estate planning documents as your family situation changes.

The Cost of Caregiving

At some point, you may care for an aging or ill parent or relative. According to AARP, Millennials make up nearly a quarter of family caregivers in the U.S. They’re most likely to juggle jobs, personal lives and caregiving.

Caregiving can take a toll on physical, mental and financial well-being. Taking time from work for caregiving not only interrupts retirement plan contributions, it can also affect social security benefits. If you become a caregiver, explore community resources, health care assistance and help from siblings to balance your financial future with current responsibilities.

Key Takeaways Key Takeaways


This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.