If you’ve been paying into your company-sponsored 401(k) and leave the company – either by choice or through a layoff or termination – those funds are still yours and you can either take them with you or leave them where they are. Even if it’s been a few years since you left the company, you should still be able to get access to those funds. Here are some options for what you can do with your 401(k) when you leave a company:
Most companies will allow you to keep your 401(k) with them but you typically won’t have the option to add to the plan, which could cost you in long-term earnings.
Transitioning your funds to a new employer’s 401(k) may be an option you will want to consider. Check with your new employer for availability.
Moving your 401(k) to an IRA will give you more control over your investment dollars and more investment options. If you have a deferred compensation plan such as a 457(b), it could be rolled into an IRA when employment ends if it qualifies. It depends on the deferred compensation administrator and the new IRA custodian, so be sure to check the details or ask your financial advisor for assistance.
Cash it out.
Due to the tax implications and penalties for early withdrawal, this is by far the most costly option and one that should be taken as a last resort. Check with your tax professional first.
If you’re uncertain what to do with your 401(k) or just need some guidance on retirement planning in general, let us know. Our financial advisor through Osaic Institutions, Inc. at 1st United Credit Union can help you with your 401(k) plan and, if needed, consolidation of those funds. He’s available to talk by phone or meet you at any 1st United branch. Schedule your appointment today.
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Rahil Machiwalla, Osaic Institutions, Inc.*
CA Insurance Number: 0G20361
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*Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. Osaic Institutions does insurance business in California as Osaic Institutions Insurance Agency. CA Agency License #OH30186. Osaic Institutions and 1st United Credit Union are not affiliated. Products and services made available through Osaic Institutions are not insured by the NCUA or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any credit union or credit union affiliate. These products are subject to investment risk, including the possible loss of value.
Before deciding whether to retain assets in an employer sponsored plan or roll over to an IRA an investor should consider various factors including, but not limited to: investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock.