What To Do With Your 401(K) From A Previous Employer


If you have a 401(k) from a previous employer, you're likely debating what you should do with it. There are a few options to pick from, which is why it may help to discuss it with a 401(k) rollover specialist to decide what will be best for you. Here are what your options will be.

Leave It Alone

You can always just leave the 401(k) alone and let it continue growing as it normally would with no additional contributions. Some people decide to do this because they would rather not change anything and deal with filling out the paperwork. However, leaving the account alone means that you are still subjected to all of the fees that are part of that 401(k) plan from your previous employer. There may be administration fees, commissions, and management fees that are all taken out of your earnings. Some people would like to avoid these fees and do something else with their money.

Roll It Over To A New Employer Plan

If your new employer offers a 401(k) plan that has more advantages than the previous employer's plan, you have the option to roll all that money into the new plan. Many people like this because it makes managing their accounts much easier with all the investments in one place and being managed by a single company. However, there still may be fees associated with your new 401(k) plan that need to be paid.

Roll It Over To A Roth IRA

If you are a high earner and unable to contribute to a Roth IRA, you may be disappointed that you are missing out on those tax-free earnings. However, you do have the option to roll over your old 401(k) into a Roth IRA account. The key thing to keep in mind when doing so is that you will need to pay taxes on those earnings before they go into the Roth IRA account, but it is the only way to put the money into a Roth IRA account if you make more than the income thresholds that it allows. 

Cash Out The 401(k)

You always have the option of cashing out that old 401(k) if that is what you want to do. There are penalties that must be paid for early withdrawal, but you may be in a situation where you need to have the cash on hand rather than have the cash sit in an account until you reach the age of retirement. 

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When was the last time you sat down and made some concrete plans for your financial future? As in most avenues of life, your finances tend to go better when you approach them in a structured way. You need to set a monthly budget and stick to it, start paying off debt, save for retirement, and make wise purchasing decisions. This sounds easier than it is, which is why hiring a financial planning professional comes in handy. On this website, you will learn more about financial planning, when it is a good idea to call in the pros, and the benefits of taking finance seriously.

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