If you’ve recently switched jobs, or are planning to make the switch soon, you’re probably trying to figure what to do with your 401(k) at your old or current employer. Lucky for you there are a couple of different options to choose from. Here a few common ones, and why rolling it over is probably your best option.
Depending on your plan and how much you have saved, you may be able to leave your 401(k) with your current employer. While there may be different reasons as to why an individual would leave their 401(k) with their old employer, it’s important to note that you cannot continue contributing to it once you leave.
In fact, many employers have to pay fees to maintain your account ever after you’re gone, and those fees end up eating away at your retirement savings. So leaving your 401(k) with your old employer may end up costing you more than what you end up saving.
Cash It Out
While you can cash out your old 401(k), it usually isn’t recommended and strongly discouraged. The reason being that it takes away from your retirement savings, and can set you back significantly, not to mention the taxes you will have to pay upon cashing it out.
On top of the taxes you will have to pay on the early distribution, you may also be subject to the 10% early withdrawal penalty. The amount of money that will have to be paid upon this early withdrawal may end up taking a huge amount of the account balance and won’t be worthwhile, and you’ll end up starting all over again.
Roll It Over
Rolling over your 401(k) is what most individuals tend to do once they switch employers. Doing so ensures that you can keep contributing without having to open a new account and begin again. If doing a direct transfer, the process is quick and simple and does not require a lot of work on your part.
Rolling over your plan can also save you a lot of money in fees, especially if SaveDay is your provider. SaveDay doesn’t charge employers fees, and participant-paid fees are the lowest in the industry. We don’t believe in charging unnecessary fees that end up eating away at your retirement savings. We want your money working for you!
Of these three options, it’s pretty clear to see which one is the best option. While cashing out your account may be tempting, it can lead to a lot of taxes, while leaving it with your old employer can eat away at your savings. To keep your money working for you, rollover your 401(k) account to your SaveDay 401(k).
Here’s how to roll over your 401(k) account if your employer offers a 401(k) plan SaveDay. If you have any questions, feel free to contact us!
Photo by Christina Morillo from Pexels.