Changing jobs? Retiring? What to do with that old 401K
According to the Bureau of Labor Statistics the average person will change jobs 10 to 15 times during their lifetime, spending an average of 4.2 years at each job. By changing jobs so often there is a high probability that someone could have multiple 401K accounts spread across multiple employers.
Below are the 3 most common options of what to do with those old accounts. By working with a CFP® professional they can help educate and assist in making the most appropriate decision.
1 -Leave the 401K account with the old Employer.
You are allowed to leave your 401K account at your old employer's recordkeeper even after severing from
employment. Your account will still stay invested but no
more contributions or profit sharing allocations will be
made to the account.
2 -Roll the account into your New Employer plan.
If you are switching jobs, most plans allow for a direct roll
over of your old 401K account into your new employers
plan when you become eligible. This allows you to
consolidate your accounts and be completely severed from your previous company. A 401K plan to 401K plan rollover is a nontaxable event and does not require any withholding of taxes.
3 -Roll over the 401K account to an IRA.
Rolling over a 401K account into an IRA is another nontaxable event, unless converting a traditional 401K
into a Roth IRA. An IRA may allow for more investment
options and even professional management if you choose to use a financial advisor.
Information sourced from the Bureau of Labor Statistics.
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