Episode 7: What To Do With an Old 401(k)?
Have your question answered on the Money Wisdom Question Series!
- Leave the money in the 401(k) at the company
- Roll it over into an individual retirement account (IRA)
Leaving the money behind:
There are two reasons that I can think of for leaving the money behind in the 401(k) with an old company. Number one, there’s a stable value account or a fixed interest account inside that 401(k) that has a very favorable interest rate that you can’t get outside of the 401(k). It is very rare these days, but you do still see it from time to time. Number two, if you want mutual funds and the mutual funds are lower cost inside the 401(k) then they are if you roll the money over into an IRA. Again, fairly rare these days that you can’t get low cost funds outside the 401(k), but you need to investigate that.Rolling the money into an IRA:
In my experience, most people roll the money from the 401(k) over into an IRA because they have more flexibility and control. You can control the way the beneficiary designations get set up, a little more uniquely. You can also set up different trusts that can be beneficiaries where some 401(k)’s you don’t have the ability to do that. You have total flexibility on the investment side. You can invest in anything you choose, and you don’t have to stick with the company’s menu that they have decided. When your money is at the company in their 401(k), you’re the client.Conclusion:
A couple unique things that you have to think of, in my experience anyways, people tend to roll that money over to an IRA where they have the flexibility and control. You have to investigate all the possibilities. Make sure you understand the choices so you can make the right decision for your personal situation. Thanks for joining me and I hope you found this information helpful! P.S. If you enjoyed this topic and you want to hear more, you’ll love this podcast episode I recorded where I talk about the very same subject, in more detail. P.P.S. Feel free to submit questions here for a chance to have them answered!Download Now
The Ultimate 401(k) Guide
Learn the 5 decisions you need to make regarding your 401(k) in this book by Eric Hogarth, CFP®. He’ll help guide you through the many options you have with your 401(k) and to provide the clarity you need to help you make the important decisions that will provide the foundation for you and your family’s financial future.
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
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