What Should You Do with Your 401(k) if You’ve Lost Your Job (or Been Furloughed)?

LAST REVIEWED Apr 12 2021 8 MIN READ

By The Human Interest Team

COVID-19 has taken a toll on our workforce, with an unprecedented number of people filing for unemployment insurance in the last few weeks. If you’ve lost your job or are worried about losing it, you may be wondering: should I do anything different with my 401(k)?

  • When you get another job:

    • Rollover your 401(k) into your new employer’s plan. A 401(k) is among the most powerful ways to save for retirement and offers a high contribution limit, no income restrictions for contributing, and often comes with an employer match to help your nest egg grow faster.

    • If your new job doesn’t offer a 401(k), ask your employer to offer one. They’ll need to save for retirement, too, not to mention there are tax benefits for them for offering a plan. If your new job still doesn’t offer a 401(k), you can roll your old 401(k) into an IRA. Shop around and compare your rates to make sure you get a good rate. No matter which tool you use to save, save.

  • For now, until you get a new job:

Save: Keep Focused on Your Retirement Goals

  • Both a 401(k) and an IRA give tax-advantaged ways that you can save for retirement. A 401(k) offers several advantages, including tax benefits and a higher contribution limit. You can read more about the advantages of a 401(k) and how it differs from an IRA here.

  • Saving is something you should aim to be doing as consistently as you can, even if it’s only a little bit. Above all, remember that saving for retirement is a long-term game. The longer you remain in the market, the more time you have for your savings to grow and compound over time.

What if I Need to Cash Out?

  • We at Human Interest understand the harsh financial reality many are facing but cashing out your 401(k) early should only be used as a last resort. Look for another way to access money if you need it, perhaps a loan or other source of equity, or the stimulus for individuals through the CARES Act. Compare those options versus taking money out of a 401(k) by looking at the interest rates, any tax implications, as well as the terms you’ll be held to pay the money back. Locking in your losses by taking money out of a 401(k) is like paying a high-interest rate. You don’t want to shortchange your future ability to retire.

Impact to SMBs

The CARES Act

Amongst other relief packages from various organizations – signed into law on March 27th provides aid to businesses and grants qualifying Americans. But with the shutdown in effect until May, the $1,200 stimulus check may not be enough as many are already struggling to pay rent, keep the lights on, or put food on the table.

Do you have more questions about how COVID is affecting your 401(k)?

Check out our 401(k) resource page covering topics related to coronavirus. If that doesn’t answer your question, please don’t hesitate to call us at 877 475 0179.

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.

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