Today the idea of getting a job out of college and sticking with that job until you retire is almost unheard of. We continue to see more and more employee benefits being stripped away and raises seem to be harder to come by. If you happen to find yourself in that boat you more than likely will eventually look for a new job. Today employees are more likely to have 5 to 7 before retiring. If you are one that is following this trend more than likely you will find that you have left behind a 401k at a previous employer. If so, you are probably like most people who have realized this and find themselves not knowing what to do or even what they can do with their 401k at their old employer.
What you can do and should do with your old 401k can be totally different based upon your situation. It is very wise to talk to your tax accountant and/or retirement specialist to make sure you are doing the best thing for your 401k based on your situation.
What are your options? There are three simple options that you can choose from:
- Cash it out and take the funds personally- Even though you will receive a nice lump sum of money this option is typically the worst. It is a bad option because this distribution of money would be subject to taxes and penalties.
- Leave the account at the company (or plan administrator) used by your former employer- This can be a decent option if you are looking to diversify a bit more but one thing to remember is the fees that you will be subject to having 401ks at multiple custodians.
- Roll the funds and assets into an IRA- Rolling the funds into an IRA is one of the most popular options if not the most popular option. Typically rolling the funds from one custodian to another doesn't have any tax consequences unless you are moving to a roth IRA which is a pre-tax account. Figuring out the best type of account for you depends on your situation and what you are trying to accomplish. A retirement specialist or tax attorney can help you figure out what type of IRA would be
These are three simple options but typically the best option is to roll over your 401k into an IRA. One great thing that you can do when rolling over your 401k to an IRA is to roll it over into a self directed IRA. The reason this is a great option is that you get to invest into non-traditional investments. Your investment can be in things like real estate, gold, and even private equity. You can choose where and what you invest in. This is a great way to truly diversify your retirement while also taking control of it.
If you would like help rolling over your 401k from an old employer to a self directed IRA please contact us and we will help rollover your 401k easily and timely. USNews also gives some good advice as to what you should do with your old 401k.
Author: Nick Barker