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What Should You Do With An Old 401(k)?
If you are considering a job change in the future or have already made the transition, you may be wondering, “What should I do with my old 401k”? You have several options to consider – cash it out, let it be, or roll it over into your new plan or an IRA. There are benefits and drawbacks of each to consider.
Cash It Out
If you are looking to receive a lump sum of money from your old 401k, you should also be ready to fork over a chunk of money to Uncle Sam. Another drawback to this approach, you may have to pay penalties if you were under the age of 55 when you left your former employer. If these circumstances apply, you may want to consider another option for your old 401k.
Let It Be
You could choose to let your old 401k stay in place. However, your account may need to be active with various rules to follow. Be sure to check your plan policy. Also, consider that you will no longer be able to contribute to it. However, if your 401k is less than $5,000.00, you might have to move it, or it could be distributed to you.
Roll It Over
Consider rolling over your 401k to your new plan if this is an option. It might be easier to manage than having two accounts. However, make sure you consider the investment options with the new plan and any applicable fees. Another option that will provide you with much more flexibility and lower fees is to roll your old 401k into an IRA.
Before deciding, make sure you evaluate your options and talk to a financial adviser if necessary. After all, you have worked hard for your 401k. Do not let the penny of it go to waste!