This is a common question with 401(k) plans. Many people are unsure what to do with their plan when they leave their employer.
You have several options. You can keep the money in your current plan or you can roll it over into a new retirement account. Each option has its advantages.
We’ll help you figure out the right one for you.
Leave your balance with the old plan. You can keep your money with your current 401(k) plan as long as your balance is at least $5,000. But you won’t be able to make contributions, and you are still subject to the plan’s rules and limited investment choices. This may be a good option if you’re between ages 55 and 59 ½ and you will need your retirement savings soon.
Roll your old plan over to your new employer’s 401(k) plan. This can be a good move if you are happy with the new plan’s investment choices and fees. Find out if your new employer’s plan accepts transfers; not all do.
Roll your old plan over to an Icon IRA. You can roll over your old 401(k) into Icon. Be sure to do a direct rollover so that taxes are not withheld.
Cash out your 401(k). NOT RECOMMENDED! If you take a “lump-sum distribution,” you will have to pay income taxes on the money. You will also pay a 10% early withdrawal penalty if you’re under age 59 ½. Not only do you lose money, but you lose valuable time in building savings, which you might never catch up.