Rollover Details You Need

Best Combination for RetirementWhen you leave a job, should your 401(k) account go with you?

Many financial planners say yes. How come? You can move your 401(k) to an IRA at the brokerage firm or fund family of your choice, presumably giving you more (or better) investment options.

A rollover isn’t all that hard. Done right this means no early withdrawal penalty, no taxes, no sweat. (This is when rolling into a traditional IRA; we’ll cover Roth IRAs later on this month.) It’s called a “trustee to trustee transfer,” and your new IRA provider should be happy to assist.

But if you’re happy with your 401(k)—the fees are low, you like the investments, and the plan provider is good—it’s okay to leave it where it is, if your plan allows it. Or you may be able roll it into your new employer’s plan.

The key is just to keep your money in some sort of tax-sheltered account.

Unfortunately, 42% of workers pocket the money, according to benefits-consultant Aon Hewitt, even though they’ll owe income taxes (on earnings and pre-tax contributions) and, if under age 55, most likely a 10% early withdrawal penalty to boot.

Just. Don’t. Do. It.

Join the Discussion