I Just Switched Jobs, What Should I Do With My Old 401(k)?
When you’re cleaning out your desk for a career change, remember to pack up your retirement plan savings, too. You have several options for what to do with the money.
Roll Over to an IRA
Roll the balance into an individual retirement account (IRA). Consolidating with one financial institution can make it easier to monitor your accounts, manage your savings and schedule required minimum distributions in retirement.
Roll Over to Your New Employer’s Retirement Plan
Your new employer’s plan may have more investment options or charge lower fees. If they accept rollovers, you might consider moving to their plan.
Leave It Alone
Keep your money in your soon-to-be former employer’s plan. If you’re happy with the plan’s investment options and fees and don’t mind tracking multiple accounts, then keeping your money where it is might be an option for you.
Cash It Out
If you decide to cash it out, you’ll actually collect only a portion of your balance, because you’ll owe taxes at your current income tax rate along with a 10 percent penalty if you’re younger than age 55. While this hit may not seem like much, withdrawing money now could mean tens of thousands of dollars in lost income over a couple of decades.