Maintaining Benefits Through the Recession: Retirement Funds

With the unemployment rate growing and news of pending layoffs increasing each month, it’s only natural to worry about your job security – and with that comes the concern that if you do leave or lose your job your current benefits will go down the tubes along with your steady paycheck. Here’s a step-by-step guide to navigating the transition and maintaining your benefits as best as you can in these trying economic times. In the second part of this series, we’ll discuss retirement funds.

You probably have a 401(k) hosted by your company – which means they pay the administrative cost of the account and may even match your monthly contributions to a certain extent. Are you worried about that money disappearing if you’re let go? Fear not. Your money is safe in that account after you terminate employment, you just won’t be able to continue to contribute to the fund without incurring account service fees. Depending on how much money you’ve saved up throughout the tenure of your employment, you may be required to move the money to a different account, or you may be able to keep it there, so pay close attention at your exit interview when the termination of your benefits is explained to you in detail. Here are some hints for what to do with that money next.

Don’t cash it in.
While it may be tempting to cash that fund in to pay the bills when you don’t have a new job to move into, keep in mind that you will see almost half of your money disappear to early withdrawal taxes and penalties. That’s a considerable amount of your money simply gone with the wind.

Don’t touch it.
If, through investigating with your 401(k) provider, you determine you can keep the account open and continue to invest in the fund at later dates regardless of your employment status, you should simply let the money sit in that account. This is fairly uncommon, as most financial institutions will require an account fee that makes this much less affordable for individuals, and many will not let you continue to contribute, especially if your paychecks are coming from a different employer.

Move it to an IRA or a Roth-IRA.
Individual Retirement Accounts, or IRA’s, are retirement accounts that you can o