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Is Your 401(k) in the Right Place?
Making the right choices when it comes to your finances may be a little like trying to decide what to order from a diner menu. How do you know which option is best? For many people, a 401(k) or other employer-sponsored retirement plan is a big chunk of their retirement savings. But they often don’t know what to do with it when they change jobs or leave the workforce.
If you’re in this situation, you typically have four options, each with advantages and disadvantages. You may select one option or a combination. We’ve listed information for each option to help you determine the best one for you.
Option 1—Leave the money in the former employer’s plan, if permitted.
Advantages
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You’re already familiar with the plan.
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It’s easy—no action is required.
Disadvantages
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You may have limited access to your plan since you’re not an employee.
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You may be charged extra maintenance fees.
Option 2—Roll over the assets to a new employer’s plan, if one is available.
Advantages
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It’s easier to manage your retirement funds if they are consolidated.
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The new plan may offer more attractive options.
Disadvantages
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The new plan may offer fewer desirable options.
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There could be negative tax implications.
Read more: 3 Reasons to Stop Delaying Your 401(k) Rollover
Option 3—Roll over to an IRA.
Advantages
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Access to more investment options.
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Greater control over fees.
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Choose any beneficiary—401(k) accounts are limited.
Disadvantages
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You may have to pay taxes, depending on how the funds are transferred.
Read more: Take control of retirement savings.
Option 4—Cash out the account value.
Advantages
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You can use the funds now.
Disadvantages
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You have to pay taxes, and they can be substantial.
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Your nest egg will be gone.
The information here is just the tip of the iceberg. We recommend discussing these alternatives in depth with a financial advisor. Schedule your free, no-obligation consultation by calling 801-325-6260 or 1-800-540-7670.
