401(k) Rollovers

What to do with an old 401(k)

Whether you have recently retired, changed jobs, or simply decided to leave the workforce, you might be wondering what to do with your old 401(k). There are a few different options, and it’s important to weigh the pros and cons of each before making an informed decision.

• Leave it alone.
  • If you leave the account with your former employer, it can still grow tax-deferred, but you lose the ability to contribute funds. In addition, the plans investment options may be limited, and a $5,000 minimum balance is usually required.

• Rollover to an IRA or an individual retirement account.
  • There is no withdrawal penalty if you decide to rollover your old 401(k) to an IRA or an individual retirement account. Your funds can still grow tax-deferred, and you can contribute additional funds. IRA’s also usually offer a wider range of investment options, such as mutual funds, ETFs, individual stocks, CDs, and bonds.

• Transfer to your current workplace plan.
  • Transferring your old 401(k) to your new place of employment allows you to consolidate your money into one account. This will also let the account grow tax-deferred, but you are limited to the plan’s investment options, and there’s the possibility of a waiting period before the transfer can occur.

• Cash out.
  • Cashing out your 401(k) offers immediate access to your money, however the various taxes and fees associated with cashing out can quickly add up. For instance, 20% of the funds in your account will be withheld for income taxes, and if you cash out before age 59 ½ a 10% withdrawal penalty could apply.

If you have any questions about your 401(k) rollover, or about your financial future, please contact us at 631.218.0077.

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