What Should I Do With My Old 401K?Over 50% of people that leave their employers find it difficult to make a decision on what to do with their old 401k plan. There are 3 basic options people can choose. Do nothing and stay in the existing 401k assuming your plan rules allow for it. Roll it over to a rollover IRA to increase investment choices. Cash it out and pay taxes and penalties. Simple enough right? Wrong! For most individuals they make the decision to do nothing because they don't put the time into researching the different options. This can be very detrimental to their long-term plan and can have a dramatic impact when it comes time to start planning for retirement income. If you leave your employer during the year you turn 55 but before 59.5, it might make sense for you to stay in the 401k plan to take penalty-free distributions. It will also make sense for you to stay in your plan if there are specific institutional funds that you like that are only offered in your 401k Rollover IRAs make the most sense for most people because it offers flexibility of investment choice, continued tax-deferred growth, and guidance from your IRA provider. Consider the fees involved if you are working with a financial planner, broker, or insurance salesman. Keeping your 401k out of annuities can be extremely beneficial as there is no reason to pay for tax-deferred growth when you already have it free. No one cares more about your personal investment situation than you. Do yourself a favor and take the necessary steps to become educated on all the options so you can live better in retirement. Education is the most important aspect of investing and people should seek out professionals so they can become financially independent. |
