You Can Take It With You

Leaving one job and starting another is a busy and sometimes stressful time.  In the rush of learning the ropes of a new position, you may forget about your 401K account with your old employer.  But, we highly recommend that you take that account with you when you go.  After all, if you aren’t at the company anymore, your money shouldn’t be either.

The biggest mistake made when it comes to old employer plans is cashing them out.  It is certainly tempting to just withdraw the full balance and enjoy the “bonus” cash, but that defeats the purpose of those funds being set aside for retirement!!

The smarter move is to do a direct rollover out of the old 401K plan and into a new retirement account.  If your new employer’s 401K plan accepts rollovers, that may be a quick and easy choice to consolidate all of your retirement funds in one account where you can keep an eye on them.

If your new employer doesn’t have a retirement plan, or the plan has limited investment choices or high fees, you can always roll your old 401K account into an IRA.  With an IRA, you have total control over your money, how it is invested, and what the charges will be.  Plus, an IRA can accept rollovers from all of your other retirement plans, both past and future accounts with other employers.  So, your IRA can be the one account to stash all of your retirement funds away.

Many people figure it is fine to just leave your old 401K at your old employer.  However, we’ve seen two big reasons why you should not just let it stay:

  1. You lose track of your plan—many times, we have had clients bring us statement of old accounts that they forgot about. In one case, a client didn’t know her deceased husband even had a retirement plan from one of his jobs from twenty years ago.  It wasn’t until she started receiving mail addressed to her departed spouse encouraging him to take his required minimum distribution that she became aware of the account.  Then, since the company had been acquired several times, it took a very long time to figure out who to talk to in order to claim the account!
  2. You neglect the management of the investments—it is easy just to open statements, casually glance at them, then toss them in the file (trash?). But, if a retirement account is left unattended, it can quickly become far more risky than intended and cause money to be lost in volatile markets.  It is too risky to let your portfolio ride without rebalancing.

So, if you have left a retirement plan behind, we urge you to pull out the most recent statement and make the smart move to rollover the old, neglected plan to a new retirement account where you—or your advisor—can monitor, rebalance, and grow that plan into a secure financial future.

You Can Take It With You
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