BY SUZANNE HAZLETT, MBA, CIMA®, CFP®
“Not getting what you want is sometimes a wonderful stroke of luck.” – Dalai Lama
According to Reuters, layoffs announced by U.S. employers jumped 245 percent in February, with federal government job cuts leading the surge. Government agencies accounted for the bulk of these layoffs, with 62,530 federal workers dismissed in the first two months of 2025. That’s an increase of 41,311 percent compared to the same period in 2024.
For many Americans, employer-sponsored retirement plans represent the lion’s share of their savings strategy. But what happens when your employment ends?
You typically have four options for your account held in a former employer’s retirement plan:
- Cash-out the account
- Leave the money in the former employer’s plan if permitted
Rollover the assets to a new employer’s plan if one is available
Rollover the assets to an Individual Retirement Account (IRA)
Cashing out is called a distribution, and the plan administrator must withhold 20% of the distributed amount and send it to the IRS to be applied to the income tax. Also, if the distribution occurs before the plan’s retirement age, you will owe the IRS an additional 10% penalty for the early or premature distribution.
Leaving the money in your former employer’s plan may incur increased fees and expenses, limited services, and limited investment options. However, it would avoid tax implications and potentially protect the assets from creditors and legal judgments.
If allowed, rolling the assets to your new employer’s plan may also provide limited services but would also avoid tax implications and potentially protect the assets.
A rollover to an IRA opens the realm of investment possibilities. Fees and expenses would be specific to the custodian firm and investment product. Service options could be extensive. Protection from creditors and legal judgments would be state-specific.
Gathering all necessary information and reviewing the decision factors will help narrow the options that best serve your objectives.
Suzanne Hazlett, MBA, CIMA®, CFP®, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James and its advisors do not offer tax or legal advice. You should discuss tax and legal matters with the appropriate professional. This information should not be construed as a recommendation. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. 675 Sun Valley Road, Suite J1 + J2, Ketchum, Idaho, 83340 208.726.0605 HazlettWealthManagement.com
