Making an appropriate move can help your career significantly; new responsibilities, development prospects, and higher income. At the same time, there are many challenges; changes in corporate culture, getting to know new colleagues, in some cases relocating and getting to know a new place.

Between handing over at the old and getting started in the new, there are many activities on your plate, and a temptation to skimp over some of them. Normally, people are quite diligent about collecting their cash dues – salary payments, any bonuses or extras due. However, deferred payments like retirement funds often get the short end of the stick; It’s too far away in the future, and seems to be something you can get back to later when you have the time. While such logic is tempting, it doesn’t pay to ignore IRA’s and potential retirement benefits.

Quite often, this is the biggest chunk of investible money to most employed people. Even if you’re at the start of your career and have just a few thousand bucks in the kitty, it’s still a lot more than anything else you have. Mid career, with judicious planning and investment, you’re likely to have a sizeable amount, plus any possible retirement benefits that have vested.

Towards the end of your career, a career move often makes sense, if it helps extend your working years and keep the cash coming in much longer. But not if you lose out on what you’ve already put together.

Dealing with this isn’t easy; taxes and penalties punish a mis-step, and finding qualified advice to find the best option is also difficult. Nevertheless, you could simplify this by asking the right questions

1) Should you move your money, or let it remain where it is?
2) If you’re moving it, where should you move it to?
3) How do you make the move?

These questions apply regardless of which stage you’re in; the answers and calculations will vary, but getting these will help you decide which option is best for you.

Leave it where it is

Some 401(K) plans permit ex-employees to continue to keep their funds in the plan; others don’t. Even where it’s allowed, employers are allowed to push you out of the plan if the balance is less than $5,000.

Assuming you have the choice, you need to decide whether to keep it as is or move it out. Generally, if the plan offers a variety of benefits which you won’t get in your new plan – access to low cost, top quality investment choices, additional investment advice, institutional pricing - it makes sense to stay with it. Do remember to check if the benefits are available to you even after you’ve left the employer. Typically, if you’re making a move from a large corporate to a startup, this makes maximum sense.

Also check about options to move it later, if you wish to; when you have a number of years left in your career and may move out of state, managing this could become a hassle later.

Moving retirement funds.

Three options – two good, one bad.

• Moving to your new employers’ plan makes sense if there are significant advantages, or even comparable benefits to your earlier plan.
• If your new plan doesn’t make sense, but you still need to move it, put it into a traditional IRA account with any reputable bank or fund. If you already have an IRA account, consolidate this with the existing fund.
• The bad option – cashing out. Between taxes and penalties, you lose!

Making the move

Once you’ve decided to make the move, there still are a couple of areas that you need to watch out for. Most employers or fund brokers will walk you through the process of filling up the necessary forms, and even contacting your ex-employer to have the funds transferred as a “direct rollover”. In this case, the funds go directly from your old plan to your new plan, with the check being made out to the new administrator or trustee. Usually, there are no withholdings for taxes. Even if your employer doesn’t help, you can make a request to your former employer for a direct rollover.

What happens if the check is in your name, rather than the administrator? First off, there’s an automatic withholding (usually 20%) for taxes. You have 60 days to invest it into a tax deferred plan – but you’ve got to come up with additional funds to replace the 20% withheld. If you miss the 60 day window, you have to pay taxes on the entire amount that year, plus a 10% penalty.

This penalty also applies if your bank or broker makes an error – and doesn’t list the account as tax-deferred. Recheck all statements, and make sure