®
Important information
for retirement plan participants
Know your options:
What to do with your retirement savings1
It’s important to understand the options for
the savings you have in your former employer’s
Retirement savings options
retirement plan. If you are eligible to take your
Roll savings into an Individual
money out (this is known as a distribution), there 1 Retirement Account (IRA)
are typically four possible options.
Keep savings in your former
There are advantages and drawbacks for each 2 employer’s retirement plan
option. You should consider the differences in
(if allowed)
investment options, fees and expenses, tax
implications, services and penalty-free withdrawals. Roll savings to your new
3
employer’s retirement plan
This summary can help you identify some
important considerations.2 There may be other Cash out savings and close
factors to consider due to your specific needs and 4
the account
situation. You may wish to consult with your tax or
(May use a combination of these options)
legal advisor.
Retirement savings options
1 Roll savings into an IRA
Advantages Drawbacks
• Maintains tax-deferred status of savings • Investment expenses and account fees may be higher
than those of employer plans
• Continue to make contributions and save for retirement
• No fiduciary required to prudently monitor the cost and
• Combine other qualified plans or IRA savings into one account quality of the investment options
• Offers greater control as it’s your account and you make • IRS penalty-free withdrawals generally not allowed until
the decisions age 59½
• Offers broad range of investment options to fit needs as • Loans not allowed. Can only access money by taking a
they change over time taxable distribution
• Protected from bankruptcy • Limited protection from creditors
• May have the services of a financial professional to help • In-kind transfers of company stock to an IRA will result
with investing and retirement planning in appreciated value being taxed as ordinary income at
• Flexibility when setting up periodic or unscheduled withdrawals withdrawal from the IRA
• May help with planning and managing required minimum
distributions at age 73
It’s important to know the types and range of investments and fees of an IRA.
2 Keep savings in your former employer’s plan (if allowed)
Advantages Drawbacks
• Maintains tax-deferred status of savings • Changes made to the plan by your former employer will
• Keeps current investment choices impact you (i.e., plan investments, fees, services, plan
providers, plan termination)
• Preserves any guaranteed interest rate
• Investment choices limited to those offered through your
• Keeps ownership of company stock in the account where it may former employer’s retirement plan
have certain tax benefits at withdrawal
• Subjects you to limitations of the plan, including income
• Fees in employer plan may be lower than similar individual distribution provisions when you retire
accounts
• Account may be assessed fees for plan administration or
• Plan fiduciary required to prudently monitor the cost and other reasons
quality of the investments options
• Access to personalized investment advice or advice that
• IRS penalty-free withdrawals if you’re at least 55 years old in takes into account your other assets or particular needs
the year you left your job may not be available through the retirement plan
• Protected from creditors and bankruptcy • No new contributions allowed
• Plan may provide access to planning tools, educational
resources and phone helpline
Check your former employer’s summary plan description to confirm plan details and requirements.
3 Roll savings to your new employer’s plan
This is an option if you are joining a company that offers a retirement plan.
Advantages Drawbacks
• Maintains tax-deferred status of savings • Changes made to the plan by your employer will impact you
(i.e., plan investments, fees, services, plan providers, plan
• Continue to make contributions and save for retirement termination)
• Combine other qualified plans or IRA savings into one account • Investment choices limited to those the plan offers
• Fees in employer plan may be lower than similar • Subjects you to limitations of the plan, including income
individual accounts distribution provisions when you retire
• Plan fiduciary required to prudently monitor the cost and • Account may be assessed fees for plan administration or other
quality of the investments options reasons
• IRS penalty-free withdrawals if you’re at least 55 years old in
• Access to personalized investment advice or advice that takes
the year you leave your new job* into account your other assets or particular needs may not be
• Protected from creditors and bankruptcy available through the retirement plan
• Plan may provide access to planning tools, educational • Plan may offer fewer or more expensive investment options
resources and phone helpline than your former employer’s plan
• Loan provisions may allow borrowing from the rolled • May be more restrictive on withdrawals while employed
over money • Roll-ins may not be allowed or an eligibility period may need to
• No required minimum distribution at age 73 from a current be satisfied
employer’s plan is required, unless you are a 5% or more • In-kind transfers of company stock will result in appreciated
owner of the company value being taxed as ordinary income at withdrawal from the
retirement plan
Check your new employer’s summary plan description to confirm plan details and requirements.
4 Cash out savings and close the account
Advantages Drawbacks
• Immediate access to cash • At distribution, 20% withheld on the taxable account balance for
pre-payment of federal income taxes
• May see significant tax advantage for company stock that has
substantially appreciated • State taxes and a 10% early distribution penalty may also apply
on taxable account balance
• If after-tax contributions were made, could take these amounts
tax-free (though you will be required to pay tax on the earnings • May move you to a higher tax bracket
of these contributions) • Forfeits future tax-deferred growth potential
• Not protected from creditors or bankruptcy
If this money is no longer set aside for retirement, will you have the savings you need when you want to retire or can no longer work?
Investment and Insurance products are:
• Not Insured by the FDIC or Any Federal Government Agency
• Not a Deposit or Other Obligation of, or Guaranteed by any Credit Union or Bank
• Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested
*
In-service withdrawals may be allowed while you are still working for the company sponsoring the retirement plan. Check with the plan administrator
for details and requirements.
1
These considerations were prepared for pre-tax 401(k) accounts. Some – but not all – of these considerations may also apply to other types of plans
and/or accounts (e.g., Roth after-tax accounts). You may wish to consult a tax advisor if you participate in a different type of plan or hold a different
type of account.
2
These descriptions are for general educational purposes and should not be construed as advice or recommendations. This is not tax or legal advice
and you may wish to consult with your tax or legal advisors on these issues.
Insurance products and plan administrative services provided through Principal Life Insurance Company®, a member of the Principal Financial Group®,
Des Moines, IA 50392. | PG4810-09 | 11/2024 | © 2024 Principal Financial Services, Inc. | 3957871-102024