Surviving a Layoff: Take Control of Your 401(k)

March 23, 2016 | By Steven DiGregorio

Take Control of your 401(k)

Surviving a Layoff: Take Control of Your 401(k)


Corporate Downsizing

Getting laid off is never easy, you’re faced with having to rethink your spending… right away! Think about your essentials first and then what you’ll need in order to get back on track. Eliminating unnecessary spending will help you formulate your game plan and alleviate the stress of not having enough money at the end of the month. Assess your accounts and savings to determine how long they will last. Factor in any unemployment money as well as any alternate sources of income you can earn.

Now get in touch with your accountant and investment advisor to evaluate the cost and feasibility of freeing up resources from your 401(k), if needed.

Consult with your financial planner to weigh the pros and cons:
  1. Do you leave your 401(k) plan with your former employer?
  2. Should you consider rolling over your 401(k) to an Individual Retirement Account (IRA).
  3. Or possibly transfer your old 401(k) into the new company’s plan.
Leave your 401(k) with your former employer.


  • No 10% penalty on distributions
    Tapping into your 401(k) and taking a distribution before 59 1/2 is subject to ordinary income tax and a 10 percent early withdrawal penalty.  Some plan documents allow for an early withdrawal without penalty. If you lose your job at 55 or older, however you’ll still owe taxes and forfeit what could be decades more of tax-deferred growth.
  • Unrealized Appreciation
    Before rolling over a 401(k), people should consult with your financial adviser to assess the tax benefit of Net Unrealized Appreciation (NUA), 10-year averaging or other special tax breaks. For 401(k) plans that include the company’s stock, 1) there could be a cost to rolling over and 2) you may want to retain the stock as part of your retirement planning.
  • Lower Fees
    401(k) plans tend to offer low-cost investment options, just not many of them. While choice is very limited, the funds are typically less expensive than the retail mutual funds counterparts or commissions charged by a broker.
Roll over your account into an individual retirement account (IRA).


Rolling your 401(k) into an IRA affords you greater investment choices and more control of your money.

  • There are some ways to withdraw cash, penalty-free; a first-time home purchase, hardship or qualified education expenses.
  • Take control of your investment management choices. You can own stocks, bonds, mutual funds or even actual real estate within an IRA.
  • Consider transferring your 401(k) directly into a Roth IRA. You’ll have to pay conversion taxes, but all future growth is completely tax free!
  • Choose a beneficiary for your IRA, make sure the money earned and saved goes to the people you love and want to protect.
  • Your beneficiaries can stretch out the distributions from an IRA over their lifetime, controlling taxes and allowing for significant future growth.


Transfer your old 401(k) into a new company’s plan. 


  • There are limitations of investment choices in your current plan and well as in your new employer’s 401(k) plan.
  • On the upside, you will enjoy the benefits of credit protection.
  • You can borrow from your account as long as you remain employed byt that employer.

The Bottom-Line

The most important thing to remember when moving retirement money is to avoid costly mistakes. Losing your job is stressful, do not panic. Get in touch with your financial planner or legal counsel right away to carefully consider all the tax-deferred retirement plan options.

Please note that the content of this blog does not constitute tax advice and is only intended for the educational purpose of the reader.  Please consult your tax advisor for specifics regarding your circumstances.

For more information contact us at 845.563.0537 or

Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affiliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.

Make the right choice with your financial future.

Consult Compass Asset Management Group for advice & guidance that will change your life.

Plan better to live better…Call Compass Asset Management Group.


About Compass Asset Management Group

Our boutique-style firm has an investment philosophy is both prudent and value driven. We combine research from the largest firms on Wall Street with three decades of market experience to provide strategic, tactical and dynamic investment management.  Compass Asset Management Group, LLC delivers personalized financial planning, estate planning and investment management advice in a private setting with a high degree of sensitivity to your concerns and objectives. Our goal is to exceed yours expectations by listening closely, understanding deeply and communicating well through frequent, personal consultations entirely focused on your financial goals.






Retrieved on February 9, 2016 from

Powel, R. (August 16, 2012). 11 reasons to leave your 401(k) behind. Market Watch.

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Tags: 401(k), executive retirement plan, retirement, Roth IRA

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STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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