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Moving your retirement plan money with you when you change jobs may be an option to consider. Make sure to review your new employer’s policy on rollovers from other plans.
Rolling your money into a new employer’s plan gives your retirement assets the opportunity to continue growing tax-deferred. It’s also convenient to have your assets all in one place. Your new plan may provide additional benefits, such as:
Automatic investing. If your new plan allows employee deferrals, you can take advantage of payroll deductions to regularly contribute to your retirement account. You may be able to contribute up to $23,000 for 2024.
Extra contributions. If you’re age 50 or older and your plan allows employee deferrals, the plan may also allow you to make additional catch-up contributions beyond the annual limit — up to $7,500 for 2024, for a total of $30,500.
There may be rollover restrictions. Your new plan may not accept rollovers from certain types of plans, or it may not accept Roth or other after-tax money. If you are unable to roll the money into your new plan, you can instead roll it into an IRA, or roll Roth money into a Roth IRA.
Consider a direct rollover. The money should go directly from your old plan’s trustee to your new plan’s trustee. Make sure the rollover funds don’t come to you, to avoid mandatory income tax withholding.
If you want to roll your retirement plan account with a former employer to your current employer's Capital Group plan, you will need to complete an Incoming Rollover Request form. You will also need to contact your former employer's retirement plan provider to see what they require to initiate the rollover. Learn more.
Indirect rollovers are subject to withholding. If you request a cash distribution, you can still initiate a rollover. However, 20% of the taxable portion of your distribution is withheld from your distribution for income taxes. You must then roll over the money into the new plan within 60 days of receiving your distribution if you want to keep the tax benefits. If you replace the withholding with your own money — you’ll get the withholding back from the IRS when you file your taxes — you can roll over your entire account value. If you don’t replace the amount withheld, it will be considered a distribution subject to taxes and possible penalties.
Bottom line: Avoid the hassle, and work with your employer to initiate a direct rollover.
You may have to wait. Your new employer may require a waiting period before you can roll your money into the plan.
Your choices are limited. Your investment choices are limited to what is offered in your new plan.
You’ll have new rules. Participating in your new plan means you’re subject to new investment, exchange and withdrawal rules.
You can also save outside the plan. Participating in your employer’s plan isn’t the only way to save tax-deferred. If you want to put away additional money for retirement, an IRA is another great way to save.
Measure the tax implications and penalties of staying tax-deferred or cashing out with the Spend it or save it calculator.
Find out how to start the rollover process to an American Funds IRA or how to initiate another transaction.
Tax issues involving IRAs can be complex. Please consult with your tax or legal advisor before making any decisions.