New job, old 401(k) – What to do?

Congratulations on getting a new job! Along with the excitement, there are lots of decisions to be made regarding new benefits, and maybe even relocation.

According to a 2017 SHRM Employee Benefits survey, most organizations offer defined contribution plans to help employees save and plan for retirement. Ninety percent offer a traditional 401(k) or similar plan, and 55% offer a Roth 401(k) or similar plan. In addition, 76% of organizations provided an employer match for their 401(k) plans, while 40% matched Roth 401(k) contributions.

If you’ve been at your previous job for a few years, you’ll need to decide what to do with your old 401(k) plan. If you aren’t careful and make a mistake in the way you handle the account, it could cost you in taxes and penalties, not to mention how it could affect your retirement planning.

The one rule experts agree upon is this: Do not cash out your 401(k).  It’s simply not worth the financial hit you will take in fees, taxes and penalties.

Here are a few better options to consider:

Leave it with old employer: Do your research into whether the old plan is that much better than a new plan being offered by the new company. Weigh the benefits of staying put.

Roll it into the new company’s 401(k) plan: According to experts, most mistakenly believe they will incur penalties if they opt for this. That is not the case. But before automatically rolling your existing 401(k) into your new plan, do the research and compare.

Roll into an IRA: Experts say IRAs can be a way for individuals to take greater control of their retirement plans. Consider getting professional advice regarding whether this is the best course of action to meet your retirement goals.

Myriam DiGiovanni

Myriam DiGiovanni

After writing for Credit Union Times and The Financial Brand, Myriam DiGiovanni covers financial literacy for FinancialFeed. She is also a storytelling expert and works with credit unions to help ... Web: www.financialfeed.com Details