Leaving a job and starting another can be a stressful experience. But when people are forced to leave a job without having another lined up, the stresses seem to multiply - affecting relationships, moods and even decisions.

"Today, we see many people who lose their jobs and then impulsively cash out their 401(k)," says Tommy Grace, a financial center manager at Fifth Third Bank. "Unfortunately, they often do this without considering the financial ramifications or seeking advice on other options."

A 401(k) is an employer-sponsored retirement account. When people take a lump-sum payout before reaching age 59-½, they can lose up to 30 percent of it to taxes and penalties.

Seek professional advice
"When leaving an employer, it's important to seek advice from a banker or financial advisor before making any decisions about a 401(k)," Grace says. "If people need income, we often encourage them to consider a loan, debt consolidation or withdrawing only a portion of their 401(k). Taking a lump-sum payout is usually a last resort."

To avoid taxes and penalties, people can:

• leave their 401(k) with their former employer
• transfer their 401(k) to a rollover individual retirement account (IRA) by working with a banker or financial professional
• transfer their 401(k) to their new employer

All three options have advantages and disadvantages. "Although leaving a 401(k) with a former employer requires no effort, we rarely recommend this option," Grace explains. "Former employees do not always have the same investment opportunities that current employees have. Also, being former employees, they may not always receive timely answers to their questions or concerns."

For most customers, Grace recommends a rollover IRA. "Besides allowing assets to grow tax deferred, a rollover IRA allows people to control how their assets are invested," Grace says. "We can help customers devise a plan that meets their particular needs and objectives - and help them modify their investments as their needs change. We encourage people to come in so we can explain the details."

In some cases, Grace says it may be worthwhile for people to transfer funds from former employer's 401(k) to their new employer's 401(k). "Usually, the only time we recommend this is when customers think they may retire before age 59-½ or they may need to borrow from this account," Grace explains. "Some people can avoid certain tax consequences when withdrawing money from a 401(k) that they cannot avoid when withdrawing from a rollover IRA." To transfer funds to a new employer's 401(k), people simply need to fill out a form provided by their former employer.

Fifth Third does not provide legal or tax advice. You should consult your tax advisor with any questions.

To learn more about retirement accounts, contact Fifth Third at (866) 475-4201 or visit 53.com.