Life happens. We get it. Chances are you’ll have multiple jobs throughout your career working for multiple employers. It’s not a bad thing, just a matter of fact!
Do you have an old 401k at your former employer that you aren’t even sure how to access? What are your options when deciding what to do with your old 401k money?
First, you’re not alone! These are common worries and questions. Thankfully, we’ve created a simple guide to walk you through your options!
What Are Your Options for An Old 401k?
Many people even forget they had a 401k at their former employer, yet to find they have thousands sitting in an account at a job they left years ago. To access that money, simply call your former company’s HR department and they will tell you how to access the money.
Next, consider your options…
Option #1 – Let It Be
You can choose to just let the money sit there. It isn’t going anywhere, and if it does, you’ll be notified by your former employer via email or mail. The money will stay invested in the respective funds you chose upon setting up your account, and hopefully it grows over time.
This option isn’t recommended due to the limited access to the funds, the limited investment choices, and the overall limited control you have over the account.
Option #2 – Roll It Over to an IRA
This is referred to as a “rollover.” Don’t let the jargon confuse you, it just means transferring your 401k to another tax qualified retirement account such as an Individual Retirement Account (IRA). Why would you do this? Because when you rollover your old 401k to an IRA, you can choose what to invest it in, when to access it and ultimately you have complete control and immediate access to it.
Option #3 – Combine It with Your New 401k
Does your current employer have a 401k plan you contribute to? Chances are high that they do. Whether you are currently contributing to that plan or not, you have the option to rollover your old 401k to combine it with your current employers 401k plan.
Option #4 – Cash It Out
Last but not least, you have the option to withdraw the money. Keep in mind that there are consequences to doing so in most circumstances. Withdrawing your 401k money before age 55 will cost you a 20% penalty on the money and you’ll likely have to pay taxes on the money (depending on whether it’s a Traditional or Roth 401k).
There are rare circumstances in which the penalty doesn’t apply, such as a hardship withdrawal.
Factors to Consider When Deciding Which Option Is Best for You
So, how should you decide what to do with your old 401k money? First, ask yourself a few questions to guide you in the right direction such as:
- Do you have a current IRA you’ve been contributing to, or do you need to open a new one in order to process the rollover?
- If you do a rollover, do you know where to invest the money?
- What is your current age? Do you qualify to withdraw the money without penalty? Or do you have a current life event qualifying you for a hardship withdrawal?
- What is your overall objective of moving the money from your old 401k?
How to Get Additional Assistance
Thankfully, there are professionals ready to help you with the process. If you don’t know what option is best for you, consider speaking to us for a no pressure free consultation on how to rollover your old 401k and what options you have available to you.
Want more info on your old 401k options? Request for our free guide with additional details on what to do with your old 401k here. Email: firstname.lastname@example.org