Old 401(k)? You Have Options!
Most people, when changing jobs, have a lot on their minds. What to do with your old workplace retirement plan may not be one of them. Here are a few options, each with their own pros and cons.
First, you can do nothing. If your old plan allows it, you can leave your money where it is. This might be the easiest option. Be sure you understand the Plan fees and consider the range of investment options that are available and compare them to your other options.
Alternately, you may be able to roll your old plan into the plan at your new employer. This option lets you keep just one plan, which may be easier to manage. If you are still working after age 72, you are not required to start taking RMD’s until you leave the employer. Again, make sure that the range of investment options that are available and the associated fees fit your needs.
Another option is to directly roll over your old plan into an Individual Retirement Account (IRA). This may be a good option if you don’t want to leave your account with the old workplace custodian and your new employer’s plan doesn’t allow for rollover of assets. Compare multiple IRA custodians for investment options and fees to choose one that is best for you.
The last thing you should do is cash out your old 401(k)! Unless the balance in the old account is very small, cashing out will result in a tax bill. The plan custodian is required to withhold 20% for federal withholding (so you won’t get the full balance in the account). If you are under 59 ½ years old, you also face an early withdrawal penalty of 10%.
Honorine Campisi, CPA