Options For An Old 401(k)

If you’ve moved jobs a few times, there’s a good chance that you might have some money in one of your old company’s retirement plans.  Since changing jobs and keeping up with life is hectic and busy enough as it is, you might not have had time to figure out what exactly to do with that old account.

But just leaving the money there may not be best for you, depending on your situation. So here are some things to think about as you look at your old accounts.

Three Options For An Old 401(k):

Keep It Where It Is (At Your Former Employer’s Retirement Plan)

This is often the path that most people follow.  But not because it’s the best choice. It’s simply the easiest thing to do – ie, nothing.  They just leave the money where it is. It’s the path of least resistance.

But that doesn’t necessarily make it the best choice for you.  To find that out, find out the answers to these questions:

What investment options are available?  Most plans only offer a few dozen options, and you have to select from those choices.  

Are the investments broadly diversified?  Do they offer active management or passive management?  Do any of those choices match your investing philosophy?

Also, what are the fees associated with keeping your account there?  Are there any annual account fees? What are the fees of the actual investments?

These are just some of the things to consider before leaving your money in your old 401(k).

Move It To Your Current 401k (At Your Current Company’s Retirement Plan)

You also could have the option of moving your old 401(k) into your current 401(k).  And the questions you need to ask yourself are similar to the previous questions we discussed.

What are the investment options, and do they fit what you’re looking for?  And what fees will you be paying for the account and for the investments?

One benefit of going this route will be that you will have one less account to keep track of, making it easier for you to manage and make proper decisions.

But before you make any moves, make sure you understand the rules of your new plan.  Not every 401(k) plan allows you to move your old 401(k) into your current one.

Move It To An IRA Rollover

You can also move your old 401(k) account to your own IRA Rollover at a brokerage company of your choice.

You are likely to have the most flexibility in an IRA Rollover.   Unlike your old 401(k) or your current 401(k), you won’t be limited to the investment selections of those employer-sponsored plans offer.  You would have the option of investing in virtually any stocks, ETFs, or mutual fund. From there, you can select which investments would be the best fit for you.

That will give you a chance to pick your favorite investment vehicle, at a fee that you find acceptable, rather than being limited to the investments and fees in the employer-sponsored plans.

Beyond that, you’d also be able to simplify your financial life.  I find that it gets overwhelming when you have too many accounts in too many different places.  It’s hard to keep track of.

Moving your old 401(k) to an IRA when you change jobs can be a way to consolidate and simplify your financial life, while also gaining more control of your hard earned money.

There you have it, three options for an old 401(k).  What have you done in the past with your old 401(k)’s?  Did you leave them there or move them to your current 401(k) or into an IRA Rollover?

And if you’re still not sure what the best choice is for you, feel free to reach out to me to discuss.  I offer a free consultation so we can discuss if and how I can help you.  You can email me at scott@forthrightfinances.com, call me at 424-258-4460, or schedule a time with me here.

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