By Arif Halaby
Have you left a company where you had a retirement plan, let’s say a 401k, and are wondering what your options are after you have left that job?
You may be asking yourself if you should you leave it, cash it out, roll it over to your own Individual Retirement Account, or maybe even put it into your “new” 401k plan? These are great questions to ask, but what’s most important is making the best choice for you.
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Sure, leaving the account with the old company is certainly the easiest, but is it the best option? Did you take out a loan against your old account? If you answered yes, you may have to pay taxes when you move these assets to another account.
For most, the chances of having the money to pay that off are very slim. Maybe the account was left behind because you are happy with the investment choices and their performance. If this is the case, it may make sense for you to keep it there, especially if you are able to continue to move your money around while it is still in that old 401k. But just be aware of any hidden fees and risk that may also be associated with this account.
When you take the money out of one account and transfer it to another is called a rollover. “Rolling” it to your own Individual Retirement Account (IRA) is an extremely popular and favorable option for most. This is because when you do this, it allows you to have a very wide range of account options, while also allowing you to control the fees you pay, the risk you have (or don’t have) and the potential upside of the new account.
For most people this can be the best option, however if you transfer your old 401k to the new one, there are a few things to consider. First, check the amount of time required by your employer in order to qualify to open the new account.
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Also, keep in mind that if you transfer the old account over you may not be eligible to borrow from it until a later date. If you use your 401k as an emergency account, experts will warn you that this is a dangerous thing to do.
Borrowing from this account is risky, because the future of some pensions and social security is uncertain and as more and more of your retirement security is being impacted by the government’s decisions, the responsibility is now shifted on to you.
With less than 20% of Americans having a pension when they retire, you are going to have to take a greater role in the decision making process regarding your retirement. How and when you retire is now in your hands. Making decisions about an old 401k is an important part.
Source: Santa Clarita News