Ask Money

A lay-off and the 401(k)

Chris Farrell Nov 24, 2008

Question: I am getting laid off at the end of this year. I have been at the company for 12 years and have a decent nest egg in my 401k. What is the best way to preserve the value of my retirement savings as I make the transition from 401k to IRA? Max, Dalton, MA

Answer: Sad to say, your story is far from unique and it will become increasingly common in the months ahead. It’s a tough situation. The first thing anyone in your position needs to do is contact human resources and see if you can keep the 401(k) intact at the company while you look for a new job. So long as you have $5,000 or more in the plan–and it sounds as if you have much more than that–federal law says in most cases fired and laid off workers can keep the money in place. That will defer the day of retirement savings reckoning for you in light of today’s volatile market. When you do get a new job, you can either have the money rolled over into your new 401(k) plan or into a rollover IRA. (Make sure it’s an institution-to-institution transfer so that there are no implications with the shift.)

Two words of caution: First, don’t touch the money. Leave it alone. Second, be wary of any so-called financial advisors that might solicit your business when you lose your job. It seems that a number of financial services companies with high fees and poor products troll for victims among laid-off workers with an eye toward tapping into their retirement money.

Good luck finding a new job.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.