I Left My Job. What Are My Best Options for My 401(k)?

Congratulations on your new job or retirement! But now you're faced with a big question: What should you do with your old 401(k) plan? Don't worry, you have several options to choose from. Let's explore each one and help you make an informed decision.

1. Keep it with your old employer's plan
- Pros:
- Your money continues to grow tax-advantaged.
- You can take penalty-free withdrawals if you left your former job at age 55 or older.
- Many plans offer institutionally priced (i.e., lower-cost) or unique investment options.
- Federal law provides broad protection against creditors.
- Cons:
- Depending on plan rules, if you have a low balance (less than $7000), your account balance may be sent to you as a taxable distribution, or may be rolled over to an IRA, or may be rolled to your new 401(k).
- You won't be able to add any more money to the account, or, in most cases, take a 401(k) loan.



2. Roll over the money into an IRA
- Pros:
- You may be able to get a broader range of investment choices than is available in an employer's plan.
- You can add money to your IRA with annual contributions or consolidate other former employer-sponsored retirement plan or IRA assets.
- IRAs have no required minimum distributions (RMDs) while you're alive, allowing your money to grow undisturbed.
- Cons:
- Investments may be more expensive than in your 401(k).
- IRAs may have additional fees, such as account maintenance fees, that are not typically found in 401(k) plans.



3. Roll over into a new employer's plan (including plans for self-employed and small businesses)
- Pros:
- You can consolidate your retirement savings in one place.
- You may have access to lower-cost or unique investment options.
- You can continue to contribute to your retirement savings.
- Cons:
- You may not be eligible to roll over your old 401(k) into a new employer's plan, depending on the plan's rules.
- You may face fees or expenses associated with the new plan.



4. Cash out
- Pros:
- You'll have immediate access to your money.
- You can use the funds for any purpose, such as paying off debt, buying a new car, or making a down payment on a house.
- Cons:
- You'll pay taxes on the amount you withdraw, which could push you into a higher tax bracket.
- You may face a 10% early withdrawal penalty if you're under age 59½, unless you meet certain exceptions.
- You'll lose the tax-advantaged growth of your retirement savings.



In conclusion, when deciding what to do with your old 401(k) plan, consider your personal circumstances, investment goals, and risk tolerance. Weigh the pros and cons of each option, and don't hesitate to consult with a financial advisor for personalized advice. By making an informed decision, you'll be well on your way to securing your financial future.