Step 5: Rollover Your Old 401(k)

One of the most common problems is neglecting an old account

Have a 401(k) with a previous employer?

If you're coming from a previous employer, you may need to decide what to do with the money invested in your old 401(k) plan. It is common for people to neglect old accounts entirely, unaware of the account balance or the account itself. In some cases, you might be able to rollover your money into your new 401(k). There are a variety of rollover options that can be tailored to your needs or goals, contact your advisor to discover your options.

What are my rollover options?

Direct 401(k) rollover

With a direct rollover, you can request that your old employer pay the plan’s proceeds directly to your new plan. The distribution may be issued as a check made payable to your new retirement account.

Leave funds at previous employer

Although there’s no penalty for keeping your old 401(k), you do lose some perks. Money left in the former company’s plan cannot be used for loans. More importantly, investors may easily lose track of investments left in previous plans and performance may suffer.

For a comparison of your old retirement plan account or help in deciding whether to move your funds, please contact your advisor.

*If you have less than $5,000 in your old 401(k), this is not an option. Sooner or later, your funds will be forced out of the plan, triggering a taxable event plus a 10% penalty.

Cash withrawal

You may request a cash distribution of the funds remaining in an old plan. If you are under the age of 59 1/2, this option will trigger a taxable event in addition to a 10% penalty.

When used correctly, the 401(k) can provide the investor with meaningful tax benefits. If liquidating your old account seems like your best option, contact an advisor for a second opinion.

Rollover funds to an IRA

In the same way that you can transfer your money from an old employer to a new one, you can transfer money into an Individual Retirement Account. Opening an IRA is entirely separate from your current employer plan; this is a personal retirement savings account. Moving funds from a previous employer’s plan to a rollover IRA will not create a taxable event. Inside the Rollover IRA, your money can be invested and managed exactly like your 401(k).

Need Help?

Ultimately, you’re not likely to draw your retirement income from a qualified plan, like your 401(k). Instead, you can move your funds into an Individual Retirement Account, where you can continue to invest as you begin to draw income from your savings.

Reach out to an advisor for a plan tailored to your financial goals.