I read recently on unmudl.com blog that “the average worker will change jobs 3 to 7 times in their career”, often leaving a trail of old retirement plans with varying investment allocations – not to mention the headache of multiple websites and passwords to try and access these accounts.
When it comes to leaving your employer and managing your 401(k), here are four different options you may have available to you, for retirement savings simplicity:
1. Leave the funds in your old company’s retirement plan. Easy as that! You will need to keep track of this account alongside your new company’s retirement plan as you continue on your career journey.
2. Consider rolling over your funds into your new company’s retirement plan. There may be unique benefits to this so be sure to consult with an advisor, first. However, I sometimes recommend that investors consider rolling over their 401(k) into an IRA, instead. With a 401(k), you are typically limited to the target date funds and a handful of other funds that your employer makes available within the plan. Having your funds in an IRA often gives you a lot more options and flexibility.
3. Roll the funds into an IRA. IRA stands for individual retirement account, and is independent from your employer. This is a tax-free transaction that allows you to consolidate multiple accounts into one place for ease of management. You can take multiple 401(k)s, IRAs, and other retirement accounts, and combine them into one account. You can open an IRA anywhere you like, and delegate the management of the IRA to an advisor if you choose to do so. (In fact, giving specific investment advice and managing the investments in IRAs is one of my core responsibilities as a wealth advisor.)
4. Take a cash distribution. As always, consult with your tax advisor, though I typically wouldn’t recommend this option as a cash distribution is subject to tax and a 10% penalty if you’re below age 59.5 years old.
Whether you’re doing the investing yourself or working with a wealth advisor, it’s critical that you know exactly where and how your money is invested for your future. You deserve the financial confidence that your money is working hard for the retirement goals and dreams you have planned. Happy #AmericaSavesWeek, subscribers!
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