In today’s economy, switching jobs is now occurring on a more and more frequent basis. Whether by your own choice or by someone else’s choice, leaving your job is never an easy transition. The question always arises as to what to do with your old 401k/retirement account at your previous employer. You have three basic options:
1) Leave your account in your old employers plan
2) Move your account to your new employers plan (if you have found a job or already had one lined up)
3) Open your own Rollover IRA account and transfer the account there
All three of these options will not trigger a taxable event as long as you follow the basic rules and actually take the money and put it into the new account. But which option is the best??: We always recommend moving the account into your own Rollover IRA.
Why leave money at your old employer? Although you will still have access to the account, why let someone else make investment decisions for you when you no longer even work there? One of the benefits of having a 401k is the employer match, once you leave the company, this option goes away. No need to leave that money behind.
Moving the money into your new employer’s 401k is slightly better, but still not the best option. You will not receive a match on this money and you are limited in your investment options to those picked for the company, not those picked for you. Most 401k’s have 10-15 funds for you to invest in. Why limit yourself? This is your retirement we are planning for, you should be the captain of that ship, not your company.
By choosing your own Rollover IRA you can pick your own investment options from essentially anything you want, better yet, you can hire someone you know and trust to do it for you. Working with a trusted advisor is always better than going it alone. How many people do you know that have the same dreams and goals as you do?? Probably not many. Taking control of your own retirement accounts is a great step to actually getting to retirement on YOUR terms. And, who knows, the next job you get will likely not be the only one you have for the rest of your life either. You can rollover as many retirement accounts from as many jobs as you have had into this one account. Making your life and your road to retirement that much smoother.
If you have any further questions on retirement plans or financial planning in general, please contact us.
Grady Gaynor is the President & CEO of Indie Asset Partners, and has over 25 years in the investment industry. His approach to portfolio management is guided by a set of criteria developed over his tenure to help his clients manage both bull and bear markets. Make sure to subscribe to Indie Asset’s enewsletter to keep up to date on Grady’s latest posts.