Hello and Today's topic, sit, stand, roll over.

Several listeners including Maureen in New York and Michelle M

emailed me asking what they should do with their savings

in an employer-sponsored retirement plan after leaving a job.

When you change jobs or retire, you have options about what to do with your employer-sponsored

retirement plan, such as a 401k. You can cash it out, you can leave it right

where it is, you can transfer it to your new employer's plan, or you can transfer it

into what's called a rollover IRA.

So how do you decide which choice is right for you?

Here are some important tips to consider.

Cashing out your 401k is usually not a good idea because it will cost you.

You must pay state and federal income taxes on the money and if you're under each 59.

You must also pay a 10% penalty for early withdrawal.

So if, for example, you have $10,000 in your 401k and you decide to cash it out after

leaving your job,

the 10% penalty would reduce your $10,000 to $9,000.

The $10,000 would also be reduced by taxes.

If your combined state and federal tax rate were say 35%

you'd pay taxes of $3,500 on that $10,000 distribution. So after the penalty and taxes,

you'd keep only $5,500 of your original $10,000.

Ouch.

For these reasons, cashing out is rarely a good choice. It makes sense only if you're

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