life-changes

Changing jobs? What to do with that 401k

Many people are unsure what to do with their 401k plan when they leave their employer. But there are 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.

Let’s 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’re 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’ll need your retirement savings soon.

Roll your old plan over to your new employer’s 401k plan. This can be a good move if you’re happy with the new plan’s investment choices and fees. Especially if your new employer offers contribution matching. Find out if your new employer’s plan accepts transfers; not all do.

Roll your old plan over to an Icon plan. You can roll over your old 401k into Icon plan. Be sure to do a direct rollover so that taxes are not withheld. You can continue contributing your retirement, regardless of whether you’re “traditionally” employed.

Cash out your 401k. 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.

 

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