What happens to the retirement fund that I had with my previous employer? This is an excellent question since a record number of people are quitting their jobs right now. Many will sit it out now and hope to find a better position once the Pandemic calms down. Others may be leaving their current job for a new one.

Every time you change jobs, you need to decide what to do with your old 401(k) plan. A person who has had several jobs may have multiple 401(k) plans. If that is the case, they should consider consolidating all of them into one account. “It’s easier to work with bigger pools of money and diversify,” says Henry Gorecki, a certified planner for HG Wealth Management in Chicago. It’s nice to sweep things behind you and keep rolling those 401(k)s into the same rollover IRA.” 

What are your options?

There are three basic options that you should consider right now. You can leave your retirement with your previous employer, roll the account over to your new employer’s plan, or roll the account over into an IRA (Individual Retirement Account).

You could leave the money with your old employer.  

Current regulations state that your former employer has to hold onto your money only if the current value exceeds $5,000. If less than that amount, you may have to select one of the following two options.

Roll over into your new employer’s plan.

Moving your funds into your new employer’s retirement plan is a good idea if the new plan has lower fees and more investment options. The primary benefit is having all of your money in one place, which would be much easier for you to keep track of. But, you may not be eligible to join the 401(k) plan on your first day at a new job. Many employers have waiting periods before new employees can participate in their retirement plan and most other benefits. Be sure and check with their human resources department for the information you need to make the change.  

Roll over your 401(k) into an IRA

The third option is to move your cash to an IRA at the brokerage firm of your choosing. Having total control of the account is one of the main benefits of having your money in IRAs. Yes, you still have to know and follow IRS guidelines. 

There are a lot of questions we haven’t answered in this post, and you should find a good financial advisor to help you make the best decisions. Keep in mind that numerous tax implications come into play depending on what you decide to do with your retirement account. The decisions you make about your account(s) could significantly impact your long-term financial plan. Be careful and get good advice.


Larry Marvin

LifeCrafter Money $ense