What should I do with my 401K when I leave my employer?
Wednesday, September 1st, 2010 at
10:00 pm
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Definitely roll it over…do not "cash out" !!
You can go to Fidelity’s website (www.Fidelity) and get a phone number ….you want to roll it into an IRA. I have done this for myself and for one of my daughters….
You’ll get an account in which you can select from hundreds of funds to invest in ( or trade stock or ETF’s)…you can be active with the account or just let it sit and grow
Talk to a rep/advisor ( there’s no hard sell)
At 40 yrs old and $ 10,000. you’ll want to be slightly aggressive for a few years…but you could still get a nice nest egg with one of their " Freedom Funds" which are more laid back/conservative
Good luck…. and plan on adding a little ( you’ll be surprised at hoe quickly you’ll be 60 !!)
Go to your local bank and see the financial adviser guy. Usually it free and he will give you good advise as to where to roll-over your money.
See if you can "roll it over"
Your first inclination may be to cash out your existing 401k funds. Think twice before taking this option. You’re most likely going to get penalized if you take a withdrawal from your funds prior to age 59½. Assuming you were contributing to a traditional 401k plan (and not a Roth 401k) you’d be responsible for paying the tax on the money which you put into your plan plus a 10% early withdrawal penalty. There are a few exceptions to the penalty, but they are few and far between and usually the result of a severe hardship need.
A 401k rollover refers to moving a 401k plan from a former or current employer into either an IRA or another qualified plan. IRA stands for “individual retirement account” and has similar rules to the 401k. You are most likely not required to consolidate your retirement accounts into an IRA but many people choose to do so for a variety of reasons. If you contribute to several 401k plans in your lifetime, you may find yourself doing a rollover more than once.
Talk to whoever takes care of your 401k account about this.
Don’t lose money by just taking it out (fees suck).
Talk to an investment counselor about rolling the money over into a self directed IRA. This will keep you from paying taxes on the 401K balance. $10K is not very much for a retirement fund at your age, but don’t blow it off. Most people are tempted to go ahead and take the money and use it now. Big mistake. Something is better than nothing. Roll it over and try to keep making deposits for the next 20 years. It can grow into a sizable amount by the time you are 60.
roll it into a traditional ira
Roll it over to an Individual Retirement Account (IRA). This is tax free and penalty free. Invest a percentage of your income every paycheck.
Why do you need to do anything? The money is in the fund, not your previous employer. There are roll-over provisions, call the administering company and they will fix you up. It is pretty easy.
Good advice from the group. You don’t want to "cash out". That would be a mistake on many levels. Look into a couple different investment advisors. Compare the options and then make a choice.
If you have good investments in your current 401(k) then you could keep it their… but 97% of the time it is better to move it and increase your flexibility. Don’t rush into anything, you have plenty of time to make a choice.
Everyone is telling you "roll it over, roll it over!!". I’m going to tell you something a little different….
Your balance is over $10,000. You don’t have to do ANYTHING with it. If the funds are good in your current employers plan than leave it there. Many times a 401k plan has better expense ratios then you can get outside in an IRA. They do this because the balances are consolidated when determining fees. So, it’s quite possible that you could get better rates where you are at.
Additionally, if you’re in a small plan that perhaps had a 5% front end load and you roll it over….You very possible could get hit with ANOTHER 5% load in a traditional IRA. Why would you do that? I see people doing this time and time again…5% load when contributed…then roll it over to EXACT SAME FUNDS only to incur another 5% load. That’s silly and wasteful!
Check the fund class of your current employers 401k’s. If they are institutional funds or if they had a front end load…consider leaving them. If either is the case the only thing that would make me leave is if the employer made you pay the cost of administering your account. They can do that…but 99.9% of employers don’t.
If you do roll it over, please make sure that it’s in a no load, low expense ratio fund!!!
As for your overall retirement picture? You’ve only got 10k now you need to start hitting that pretty heavily…that brings up a whole new set of issues. But basic advice is to look at the expenses closely. No point in wiping out returns with commissions, trails, high expense ratios, and loads. Especially with low balances. Assuming you don’t roll it over, accumulate new contributions in low expense CD’s in an IRA until your balance is sufficient to get into American Funds or Vanguard Funds Index Funds…then accumulate in there until balance is high enough to begin diversifying. You’ve still got 27 years to save so you can do it…but not if you just give your money away.
Most importantly, if you don’t roll it over…make sure that you always keep your prior employer appraised of your current address.
Roll it over into an IRA. If you go to your bank they can help you with this. It’s basically the same thing as a 401k except your company doesn’t put any money into it. You and other investors are pooling money together.