Whether changing jobs, retiring, or simply taking a break from the working world, there are dozens of questions to be answered. Will I be happy with this change? How should I prioritize my goals or hobbies? How will this change impact cash flow? One of the last items on anyone’s mind is what to do with an old employer retirement plan. This seemingly small consideration could potentially lead to unnecessary taxes and penalties if not carefully reviewed.

Millennial's are twice as likely to change jobs than the generation before them. While this can lead to improved salary, benefits, or simply a more appropriate position, it also means more retirement accounts to manage. The days of widespread pension plans are over, leaving individuals accountable for their retirement plans. Regardless of your generation, each of us has four options with our old employer sponsored retirement plan.

Option 1) Leave the Funds Invested in the Current Plan

This method involves the least amount of effort as no action must be taken with an HR department or custodian. The account would exist almost as if you still worked for the employer, however, no further contributions are allowed and the ability to take a loan is forfeit. Before electing this option, make sure there are no restrictions on how long you are allowed to keep funds with an old employer plan. It's possible they may force to you move the account within a certain period of time.

Option 2) Move Money Into a New Employer Plan

If you are changing jobs where the new employer offers a retirement plan, it may be possible to simply transfer your old plan into the new one. This is a fairly straightforward task that can typically be processed with your new HR department. Just make sure the characterization or your dollars remains the same when moved. Pretax, post tax, and Roth funds should always transfer in a way that maintains their tax benefits. As with all employer plans, there are administrative fees to consider as well as the investment options. It may not be worth moving funds to a more expensive plan with limited investment options.

Option 3) Withdraw the Funds

Depending on the characterization of your account, this could be a fully taxable event. Not only that, but unless age requirements have been met, it's likely you'll face hefty IRS penalties. Cashing out a retirement plan is typically a method that should only be considered under extreme circumstances.

Option 4) Move the Plan Into an IRA

Similar to consolidating assets in a new employer plan, participants are also able to transfer the funds into an IRA or Roth IRA. This method would remove administrative fees and likely improve investment options, however, it could lead to advisor fees if the account is professionally managed. It is crucial this step is appropriately processed under a Direct Rollover. If done incorrectly, the entire distribution could be subject to income tax and penalties.

Regardless of the option you elect, be extra cautious with any plan containing NUA (Net Unrealized Appreciation), a loan against the assets, or a plan that owns an annuity product. Each of these circumstances further complicates a retirement plan transfer. If none of these sound familiar, it's likely you will not need to worry about them.

Don't forget about your money. It is estimated that over $100 BILLION dollars in retirement assets have gone unclaimed by rightful owners. Correctly facilitating an account transfer may seem daunting, but ignoring the task altogether could lead to an irreversible and costly outcome. Having professional assistance can provide reassurance in your decision as well as simplify potential transfers. Leaving employment is a big decision. Find an advisor to verify it's the right time while also preventing an unwelcome April surprise.

Joe Crowley, CFP® is an Investment Advisor at Exchange Capital Management.  The opinions expressed in this article are his own.