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What Do I Do With My 401(k)?

SMART MONEY

What do I do with my 401(k)?

Left your job recently or have “old” 401(k) plans sitting somewhere? Generally there are four options for this investment. But before making any changes, ask questions or talk with a financial consultant to determine which option is best for you:

ROLLOVER TO AN IRA You might consider a rollover to a new or existing IRA. More of your investments with one firm may not only be more convenient (one statement, one advisor, etc.) but could reduce brokerage fees. A rollover to an IRA could also offer more diverse investment options than your employer’s plan. The downside includes paperwork and strict rules to ensure a qualified IRS transfer; serious penalties may apply, or there could be other charges on funds once rolled over.

ROLLOVER TO A NEW 401(K) If you are a participant in your new employer’s plan, and the plan permits, you may be able to bring your old 401(k) with you. Again, the major benefit to this option is convenience.

KEEP YOUR 401(K) WITH OLD EMPLOYER If your plan permits, you might consider leaving your investment as is. The benefit? If it’s not broke, why fix it?

CASH OUT It may sound nice, but serious taxes and penalties can apply if specific conditions are not met, making this the least recommended option.

Sara Peak is a freelance writer with expertise in finance and wealth management. 

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