Written By: Tim Key
How many employers have you worked for? I’ve worked for four during my career and during that time I have participated in three different employer retirement plans. There are some folks that don’t take advantage of these for one reason or another, but many of us do even if we don’t understand everything about them. We’ve been told that we need to save for retirement even though it sounds like it is so far away and that this is an easy way to do it. We can save through payroll deduction and often times the company will even match a portion of our contribution (free money!). But what happens when you leave your job, whether it’s to retire or to start a new one? What should you do?
Many people I talk with will tell me about the 401(k)s they’ve left scattered behind in their former employer plans. They left them there because they were busy with the job change and they told themselves that they would take care of it later, but later never came. Not that you’re any less busy now but maybe it’s time to consider your options, and you generally have four to choose from:
- Keep your money in your former employer’s plan
- Roll it over into your new employer’s plan, if permitted (obviously this isn’t an option if you’re retiring or your new employer doesn’t offer a retirement plan)
- Rollover your savings to an Individual Retirement Arrangement (IRA) account
- Withdraw your savings directly from the plan, which will likely cause you to incur taxes and an additional IRS penalty of 10% if you are under age 59½
There are reasons for leaving money in your former employer’s plan as well as reasons for rolling your assets over to a new employer’s plan or an IRA. You should consider the differences in investment options, the fees and expenses, the withdrawal options, required minimum distributions, and tax treatment, to name a few.
A GenWealth Financial Advisor can provide you the necessary education so that you can make an informed decision on what you should do with your old retirement accounts. We can also walk you through the process and help with any paperwork or phone calls that are needed. Sometimes those old plans can be difficult to track down, especially if you haven’t kept up with them, but taking a little time now to take care of them can provide some reassurance that it’s done and help you know whether your retirement plan is on track.