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Investment Giant T. Rowe Price Says Take These 3 Steps Before Changing Jobs


With three out of four full-time employees planning to quit their jobs over the next 12 months, the Great Resignation is far from over. If you too are considering changing jobs, you might be wondering what to do with your retirement savings plan when you leave your current employer.

Global investment management firm T. Rowe Price recently released financial planning tips for retirement savers, recommending these three steps to take before quitting your job.

A financial advisor could help you plan for retirement and help you select investments that align with your financial goals. Find a qualified advisor today.

Steps to Take Before Quitting Your Job

With many investors reexamining their careers, revisiting your financial and retirement goals can be an important step in plotting a course for the future. Assuming you have a retirement savings plan with your current employer, what should you do with the funds when you leave?

Open a Spousal IRA

T. Rowe Price recommends that you consider opening a spousal individual retirement account (IRA) if one spouse has left the workforce or will have little to no income. In this case, the working spouse can make IRA contributions in the name of the non-working spouse to either a Traditional IRA or a Roth IRA. Contribution limits are the same as other IRAs–$6,000 in 2021 for a Traditional IRA–and contributing to a spousal IRA allows married couples to double their contribution amounts, accumulating more in retirement funds and benefiting from potential tax deductions.

Roll Over to an IRA

t rowe price job changeIf switching jobs, the investment firm suggests evaluating what to do with your retirement savings. Typically investors will roll over their 401(k) and 403(b) funds into an IRA to continue taking advantage of tax-advantaged growth, says Senior Retirement Insights Manager Judith Ward. Not every work plan allows you to leave your funds in the same account when you quit, so rolling all funds over to a separate IRA can be helpful.

Instead of moving your 401(k) savings, another option can be to take partial distributions, which allows retired investors to withdraw some of the money and leave the rest in the account. However, T. Rowe Price says that, if your plan requires you to take a lump-sum payment or periodic payments, it may be more beneficial for you to roll over the 401(k) savings into a corresponding IRA. This would allow you more flexibility when it comes time to distribute your funds.

You can also roll over your current savings to your new employer’s plan or cash out. Although every individual has different investment strategies, the investment giant recommends rolling over your retirement funds to an IRA, as IRAs allow you more flexibility and investment options. Cashing out would incur fees and would likely not help you continue growing your retirement funds with tax benefits.

Check In With Your Financial Plan

Lastly, the firm recommends revisiting your annual financial plan. Setting clear goals and checking in on your progress is vital to reaching your goals. Investors should set an early budget, make an IRA contribution earlier in the year to take advantage of full potential earnings, review asset allocations and make adjustments as needed to align with risk tolerance and investment time horizons.

Bottom Line

t rowe price job changeBefore changing jobs, retirement savers should evaluate what to do with their retirement plan savings. If one spouse is leaving the workforce, you have the option of opening a spousal IRA to continue building savings for retirement. If you’re switching from one employer to another, you can roll over your funds to an IRA, taking continued advantage of tax benefits and increasing your investment options for greater potential growth. Lastly, you should remember to check in with your financial plan to ensure that, no matter what you choose to do, you continue to make progress towards your retirement goals.

Retirement Planning Tips

  • Not sure which investment strategy will help you retire on track? For a solid, long-term financial plan, consider speaking with a qualified financial advisor. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Use SmartAsset’s free retirement calculator to get a good estimate of how much money you’ll need to retire.

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