What should you do with your 401(k) when you leave your job?

Many employers are now offering the ability for their employees to save for their retirement by providing a 401(k) plan, however, what do you do with your savings if you leave your job? There are several different options that you can choose from. Each option has its advantages and should always be evaluated on an individual case-by-case basis.

The first option is leaving your 401(k) account with that old employer until retirement. However, sometimes you may not want to do that for various reasons and you are still subject to having your money in the investments chosen by that employer for your savings. Another, issue with this could be that depending on the overall account balance is below a certain threshold, some employers require you to transfer your funds out of their 401(k) plan.

 The second option would be to rollover your 401(k) to your new employers plan (assuming they offer a 401(k)). This allows you the ability to maintain one retirement account and your new contributions will be added to your previous ones. However, you are still limited by the few mutual fund options that employer selects for you to invest in.

The third option and in our opinion the best option, is to open a Rollover IRA account. This account allows you to roll your savings from your previous 401(k) to this new account. By using this option it provides significantly more flexibility in the investments that you are able to hold, which when properly managed can potentially help create much higher returns than you might receive in your 401(k). In a rollover IRA you are not subject to choosing from a selection of 10-20 mutual funds chosen by your employer, instead your able to invest in almost every different type of investment, such as stocks, bonds, mutual funds and alternative investments to name a few.

Over time having a properly managed rollover IRA that is being monitored and adjusted on a regular basis to reflect changes in the market can create a significant difference in value at your time of retirement. Each option has their own merit and the important part is that those funds have been saved for retirement.

For more information on what option is best for you or about opening a rollover IRA please reach out to us and we would be happy to discuss the options with you!