What Are Your Options With An Old 401(k)

Changing jobs is a part of life. Knowing what your options are with your old retirement plan can make the transition a little easier.

Option 1: You can leave it alone.

• Pros:
  • You don’t have to do anything. You can just leave it be.
• Cons:
  • Now that you’re no longer an employee there may be extra fees that are associated with that 401(k)
  • The 401(k) provider may change and your login information may no longer be valid and you will have to figure out where the 401(k) has moved to
  • You will also be limited to the investment options that are inside of that 401(k)
  • You may forget to change the beneficiaries as your life changes
  • Or maybe you forget about the account altogether

Option 2: Move it to your new employer’s 401(k)

• Pros:
  • Consolidating your accounts will help to simplify your life.
• Cons:
  • The new 401(k) may have higher expenses
  • The new 401(k) may have worse investment options

Option 3: Cash out the old 401(k)

• Pros:
  • You can now do whatever you want with the money.
• Cons:
  • Unless you’re over age 59.5, a 10% early withdrawal penalty will be applied by the IRS
  • The amount you cash out will be subject to Federal and State taxes in the year you take the distribution
  • Cashing it out could be destroying your retirement nest egg

Option 4: Roll it over to an IRA (Individual Retirement Account)

• Pros:
  • You will now have unlimited investment options
  • More transparency over the fund expenses and the maintenance fees
• Cons:
  • You will have to do some legwork:
    • Open an IRA
    • Transfer the 401(k) to that new IRA
    • Select the investments
    • Monitor the investments
    • And rebalance the portfolio 1-2 times per year

Choosing what to do with your old 401(k) can be a daunting experience. If you would like to discuss your specific situation please call the office at 330-990-8895