2) Choosing to Cash Out
It is very common for workers to choose to cash out their retirement balances after leaving a job, especially those that are younger. However, this can have several detriments and is definitely not the best idea in the long run. When people cash out, they will perceive this money as found, rather than a seed for retirement. While you do receive that money upfront, if you are younger than 55, you have to pay early-withdrawal penalties, as well as lose decade of the tax-deferred growth. It is much better to keep all of that saved money in a retirement plan. You can do this by putting the money in an IRA, or if you’re allowed, you can leave it in your old company’s 401(k) or put it in your new company’s 401(k). The keeps you from having to pay taxes on the money and allowing it to grow until you are ready to retire.