What to do with your 401(k) from a previous employer?

March 3, 2022

You have options on what to do with your retirement plan when switching jobs. Whether you are quitting to start a new job, leaving involuntarily, or planning on leaving at some point, you need to think about what to do with your 401(k), 457 or 403(b). Making the wrong decision could end up costing you money with taxes and penalties.

The options are to leave the account where it is, roll the account into your new employer’s retirement plan, roll it into an IRA, or take the cash distribution. People end up leaving the account where it is at due to procrastination or not knowing their options. Rolling it into the new employer’s plan has advantages and disadvantages.

Most 401(k)’s have limited investment options, do not offer financial planning advice, but do allow you to take a loan against it if ever needed. The cash distribution option is seldom recommended due to the penalty (if younger than age 59 ½) and the taxes.

Rolling the account into an IRA allows for greater investment options. You can have access to individual stocks, ETFs (Exchange Traded Funds), mutual funds, and alternative investments. Another advantage of rolling it into an IRA is that you can have it professionally managed along with receiving financial planning advice for all your investments. If you need help with deciding what to do with old 401(k)s give us a call and we can review the options for your individual situation

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