Old 401(k) Plans
This month we are going to focus on old 401(k) plans. There’s a good chance that you have changed jobs at some point in your adult life. If you haven’t, there are only a few reasons why:
- You started your own business and have built something that you still enjoy and is successful.
- You found a great job early in your life, worked your way up, and still enjoy what you do.
- You just haven’t changed jobs yet.
While there may be a few more reasons why (feel free to leave them in the comments), the fact is, most people don’t stay at one employer for their entire career.
In fact, according to the Bureau of Labor Statistics, the average person stays with their employer for 4.1 years and will have roughly 12 jobs in their career.
Why Is This Important?
Almost 70% of employers in America offer some sort of retirement plan. At some point in your life you will have to answer the following question:
What do I do with my 401(k) when I leave?
This is a question many people have when they change jobs. There really is no hard and fast rule either. Many times it will depend on each individual’s situation. Sometimes you will be forced into a decision by your previous employer depending on your account size.
What To Do?
There are several options you have when changing jobs. I will lay out the most common ones below.
- Roll your old plan into your new company’s 401(k) plan. Most 401(k) plans offer the ability to roll your old plan into your new one. This is an easy option to keep all of your money together and typically doesn’t cost anything to do.
- Roll your old 401(k) into an existing or new IRA. This is another option that typically doesn’t cost anything and will allow you to have more freedom in how you invest your money.
- Do nothing and leave it where it’s at. This can be an option if you are leaving a company with a strong 401(k) plan with really good fund options and low expenses. You may also be joining a company that doesn’t offer a plan and you don’t want to deal with rolling it into an IRA.
There are other things you can do, but these are the most common. As I mentioned above, there is no one way that is the right way for everyone. Please consult a financial planner or someone you trust to help you make the best decision for yourself and your family.
Did You Know?
Currently, there are an estimated 24.3 million retirement accounts worth ~1.35 trillion dollars left behind by job-changers according to a study done by Capitalize Research.
That is a lot of money left behind. Life gets busy and it’s hard to keep track of all the moving parts. Take the time necessary to make sure you know where all of your accounts are and you know how to access them.
Whether you choose to do that on your own or partner with a financial planner is up to you. It could be worth more than you know.
Quotable:
“It’s ironic how we often forget things worth remembering, but remember things worth forgetting.”
-Author Unknown