Figuring out what to do with your 401(k) when changing jobs can feel intimidating. We’ve spelled out your 4 key options in this guide below.
- Don’t withdraw your 401(k) savings unless you absolutely need to. You’ll pay taxes and penalties, and lose the chance to grow your assets over time.
- Rolling over your 401(k) into an IRA is a popular, tax-free way to keep your money growing. It allows you to monitor your fees and investments, and stay in control of your assets. You get to choose the company that manages your money – not your employer.
- Rolling over into a new 401(k) is not a bad choice either but often takes longer, requires more work, and isn’t always permitted by your new employer or 401(k) plan.
If you’ve ever wondered what to do with a 401(k) when you’ve changed jobs, you’re not alone. Millions of Americans change jobs each year and face a similar question. Unfortunately the information we receive from our employers at the time of job-change can be confusing. The result is that many of us decide to deal with the situation later, especially given everything else we might have to do alongside a job-change. While that’s understandable, the money in our 401(k) accounts is a huge asset and making a well-informed decision on what to do with it doesn’t have to be time-consuming. There are 4 main options, each with different pros and cons.