Rolling with retirement.

Job change is the No. 1 reason people roll over a retirement plan, moving their 401(k), 403(b), 457(b) and so on from one employer-sponsored plan to the next retirement plan. Most people change jobs 12 times before age 50, according to the U.S. Labor Department, so you would think that knowing how to roll over a retirement account was as American as walking the dog.

But it's not. Most workers get little to no direction about their retirement plans when changing jobs. Your former employer has no incentive to help, and your new employer may be uncomfortable providing financial advice.

Your rollover options.

Rolling over — or transferring — your 401(k) or other employer-sponsored retirement plan makes sense for several reasons. For one, you'll continue to get all the benefits of a federally authorized plan, including deferring income taxes on earnings and providing a way for your new employer to match your future contributions, if any, to the plan. For another, many plans will give you the power to direct the investment of your money based on the risks you are willing to accept.

Some companies permit ex-employees to keep their retirement plan, so you don't have to do a rollover. But your old company may prohibit you from making new contributions, hindering your ability to grow your retirement. In addition, it can become confusing to manage more than one retirement plan. So, you may find it easier to roll over your retirement plan to your new employer-sponsored plan or to set up your own personal IRA at STCU or other financial institutions.

The most common rollover options are:

• Rolling funds into your new employer's sponsored plan.
• Rolling funds into your own Individual Retirement Account.
• Cashing out your account to reinvest later.

Do the two-step rollover.

Rolling over your retirement fund can be a simple, two-step process when it moves from one plan to another:

1. Set up a new 401(k) or other retirement account with your new employer.
2. Direct the administrator (sometimes called the custodian) at your old company to make a "direct rollover" of your funds to the new retirement plan you just opened at your new company. The administrator will need account numbers and other information to transfer the money by check or electronically.

A direct rollover puts your funds back into action, so your money can continue to earn dividends and possibly gain in value if the markets go up.

If your new employer does not sponsor a 401(k) or other retirement plan, your next best option may be rolling over your retirement plan to an IRA. Most banks, credit unions, and investment firms can help you open an IRA. (Contact STCU or learn more about our IRA options here.)

A traditional IRA may allow you to take a tax deduction on contributions, whereas a Roth IRA may allow you to receive tax-free retirement income. Consult a tax or financial adviser if you are unsure which is best for you.

The trickiest "rollover" may be cashing out your retirement plan to reinvest it later. Because this maneuver triggers a taxable event, the IRS could tax you on the withdrawal if it's not rolled into a new plan within 60 days. That could wipe out a large chunk of your savings. Cashing out also creates a temptation to spend money you had planned for retirement, undermining your long-term financial goals.

A direct rollover puts your funds back into action, so your money can continue to earn dividends and possibly gain in value if the markets go up.

Withdraw now; retire later. Much later.

A hardship withdrawal can be made at any time, without penalty, from an IRA for unreimbursed medical bills, disability, and death. But withdrawals from a 401(k) and other employer retirement plans are highly restricted, with the exception of some plans that allow employees to take out a loan and pay themselves back with interest.

Tough restrictions on withdrawals are intentional. They discourage you from wavering on your original goal to retire with enough money to avoid living in your son's basement.

Raiding your retirement plan can cost you a lot. For example, if you withdrew $10,000 from a retirement plan that was earning 8 percent interest, compounded monthly, your fund could have $50,000 less in 20 years; or $110,000 in 30 years!

Do your research

Finally, before rolling over your funds to a new employer-sponsored retirement plan, you should evaluate the plan's structure and performance. Make sure it provides investment choices you prefer and does not charge you unreasonable fees. If the plan doesn't meet your needs, you still have the option to roll over your funds into an IRA at STCU, a local bank, or investment firm.

Use such popular online rating tools as Bloomberg 401(k) analyzer or BrightScope.com to get started. Then meet with a trained plan administrator, financial planner, or tax adviser to discuss your options for rolling over your retirement plan. They can answer questions and alert you to unexpected taxes or future losses you'll want to avoid.

By diligently contributing to your retirement plan each month ─ and taking care to properly roll it over when changing jobs ─ your funds can grow without disruption, providing you the savings you'll need to enjoy your retirement.

Notes:

Before deciding whether to retain assets in an employer-sponsored plan or roll over to an IRA, an investor should consider various factors including but not limited to: investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock.

Before you elect to open an IRA account and engage your investment representative, please review all account statements and disclosure documents related to the IRA and services to be provided under a new relationship and consult with a qualified tax adviser as needed.

If transferring an existing retirement plan into an IRA, you should be aware that (i) Those assets will no longer be subject to the protections of ERISA (if applicable) (ii) depending on the investments and services selected for the IRA, you may pay more or less in transaction costs than when the assets are in the Plan, (iii) if you are between the age of 55 and 59 ½, you would lose the ability to potentially take penalty-free withdrawals from the plan, (iv) if you continue working past age 72 and transferred your plan assets to a new employer's plan, you would not be subject to required minimum distribution and (v) withdrawing assets directly would be subject to federal and applicable state and local taxes and possibly be subject to the IRS penalty of 10% if under age 59½.