You did it! You found a new job with another company and you’re ready to start the next phase of your career. You enjoyed you previous employer, but you are just ready for a new challenge. As you are packing up your desk you realize there is one more thing you need to take care of: your 401k.
You had been saving money for retirement in that 401k for so long and now you need to figure out what to do with it. Do you leave it with your old company? Move it somewhere else? Do you need to hire a professional?
Here are a few options for your 401k when you decide to leave your job.
Leave it With The Old Company
You can keep your 401k with your previous employer and continue to manage it as you would if you still worked there. Unfortunately you won’t be able to contribute any additional money to it, but you can manage your funds the same way you did before.
Just make sure you don’t forget about the money. Out of sight, out of mind can cause you to ignore the old 401k and forget to make updates as your investment strategy changes.
Move it Into Your New 401k
Some companies will allow you to roll the balance into their 401k plan. This is a good option if you want to keep the money in a 401k and be able to manage everything from one place.
Before you do this, make sure to look at your investment options. If you don’t love the investment options with your new company then it doesn’t make a lot of sense to roll a large sum of money into that account.
Rollover your 401k into an IRA
One of the most popular options is to rollover the money into an IRA where you have any number of investment options. This is typically a great option for people who don’t want to be constrained by limited 401k investment options.
If you choose to do a rollover, you may want to talk with a professional. This can be a complicated matter and financial professionals are experts in this type of transaction.
You can also rollover the balance of the 401k into a self managed brokerage account, but you need to do your homework and make sure you are following all the appropriate laws and regulations so you don’t get hit with a huge tax bill.