What Should You Do With an Old 401(k)?

When you leave a job, your 401(k) does not disappear—but it can easily become forgotten. Many people have retirement accounts sitting with former employers without knowing how the money is invested, what fees they are paying, or whether the account still fits their retirement goals.

Option 1: Leave It With Your Former Employer

Some employers allow former employees to keep their money in the company's retirement plan.

This may be worth considering if:

• The plan offers strong investment choices.
• The fees are reasonable.
• You are satisfied with the plan's performance and service.
• You want to preserve certain protections or withdrawal options available through the employer plan.

However, leaving the account behind may make it easier to lose track of your money. You may also have limited investment choices and may no longer receive the same level of support you had as an employee.

Option 2: Move It to Your New Employer's 401(k)

If your new employer's plan accepts rollovers, you may be able to transfer your old 401(k) into your new plan.

This can make retirement planning simpler because your workplace savings are kept in one place. Before transferring the money, compare the new plan's fees, investment choices, withdrawal rules, and available services.

Not every employer plan accepts incoming rollovers, so check with the new plan administrator first.

Option 3: Roll It Into an Individual Retirement Account

Another option is to complete a rollover into an Individual Retirement Account, commonly called an IRA.

An IRA may provide:

• A wider selection of investment choices
• Greater control over how the money is allocated
• The ability to consolidate multiple retirement accounts
• Easier beneficiary and retirement-income planning

A direct rollover generally allows the money to move from the old plan to the new account without being paid directly to you. This can help avoid unnecessary withholding and reduce the possibility of missing an important rollover deadline.

If the distribution is paid to you instead, federal withholding and the IRS 60-day rollover rule may apply. Because mistakes can create taxes and possible penalties, it is important to understand the process before requesting a distribution.

Option 4: Consider a Retirement Income Strategy

Some people are less concerned about pursuing maximum market growth and more interested in protecting part of their retirement savings or creating dependable future income.

Depending on your needs, a properly structured annuity may offer features such as:

• Protection from direct stock-market losses
• Tax-deferred growth
• Optional lifetime-income benefits
• Beneficiary options
• A more predictable retirement-income strategy

An annuity is not appropriate for everyone. Products can have surrender charges, limits, fees, and different levels of access to your money. Guarantees depend on the claims-paying ability of the issuing insurance company. The contract should be carefully reviewed before making a decision.

Option 5: Take the Money in Cash

You may be able to withdraw the money, but cashing out an old 401(k) can have serious consequences.

The taxable portion of the withdrawal is generally subject to income tax. If you are younger than age 59½, an additional 10% federal tax may also apply unless you qualify for an exception.

Cashing out can also reduce the amount of money available for your future. Even a seemingly small balance may have significant growth potential when left invested over many years.

Questions to Ask Before Making a Decision

Before moving an old 401(k), consider the following:

1. What are the fees in the current account?
2. How is the money currently invested?
3. How much investment risk am I comfortable taking?
4. Will I need access to this money before retirement?
5. Do I want continued growth, greater protection, future income, or a combination?
6. Are there special employer-plan benefits I could lose by transferring the account?
7. How could the decision affect my taxes?
8. Does the account have company stock, outstanding loans, or other features requiring special attention?

Avoid Making a Hasty Decision

Do not move retirement money simply because someone says one option is always better. Each choice has advantages and disadvantages.

Before transferring your account, compare:

• Fees and expenses
• Investment options
• Access to your money
• Creditor protections
• Tax consequences
• Required minimum distribution rules
• Beneficiary options
• Retirement-income features

A careful review can help you make a decision that supports your complete financial strategy.

Do You Have an Old 401(k)?

Your old 401(k) represents years of work and savings. It deserves more than being forgotten in an account you no longer monitor.

Black Apple Group can help you review your current situation, understand the available options, and explore strategies designed around your retirement goals.

Schedule your complimentary retirement review today.

Black Apple Group — Protecting families. Reducing debt. Building retirement strategies.

This article is provided for general educational purposes and is not tax, legal, or investment advice. Retirement-plan and tax rules can change. Consult an appropriate financial or tax professional before making a rollover, withdrawal, or retirement-income decision.