Fete Lifestyle Magazine November 2021 - Food Issue | Page 25

1)Leave the money where it is

Most plans allow you to leave your savings in a 401(k) after you leave a job, as long as you have at least $5,000 invested. For accounts smaller than $1,000, some companies will force you to cash out. But if you have between $1,000 and $5,000 invested, the company is required to help you set up an IRA where you can transfer your money. Keeping your savings in a former employer's 401(k) may limit your investment options, and you may not have the benefit of regular updates from the company’s HR department alerting you to any changes in the plan. What’s more, it's easy to forget about old 401(k)s, which means you run the risk of retirement savings languishing for years with an out-of-date investment plan that doesn’t fit your current strategy. On the other hand, there may be some advantages to keeping your savings in a former employer's 401(k), depending on your situation. If you're happy with the fees and investment options offered, leaving your money in place may be an attractive option. If you change your mind, it's always possible to consolidate two or more 401(k)s later on or roll the savings over into a different account. Additionally, 401(k)s come with stronger fiduciary protections than IRAs, meaning your plan sponsors must uphold stricter rules that require them to act solely in your best interest. What's more, all 401(k) assets are protected from creditors by law. This is true of IRAs in some, but not all, states.

savings languishing for years with an out-of-date investment plan that doesn’t fit your current strategy. On the other hand, there may be some advantages to keeping your savings in a former employer's 401(k), depending on your situation. If you're happy with the fees and investment options offered, leaving your money in place may be an attractive option. If you change your mind, it's always possible to consolidate two or more 401(k)s later on or roll the savings over into a different account. Additionally, 401(k)s come with stronger fiduciary protections than IRAs, meaning your plan sponsors must uphold stricter rules that require them to act solely in your best interest. What's more, all 401(k) assets are protected from creditors by law. This is true of IRAs in some, but not all, states.

2)Roll Over the money into a new 401k

If you're transitioning to a new job and your new employer offers a 401(k), you may be able to roll the assets from your old 401(k) directly into your new plan. Before doing so, be sure to review your new plan, including its fees, investment options and rollover rules. (For instance, some 401(k)s may require you to have been employed for a certain period of time to be eligible to initiate a rollover.) If you are eligible for a rollover, you have two options to execute a transfer:

A. Complete a direct transfer

With a direct transfer, the money from your old account is deposited directly into your new account. In general, if you complete a direct transfer, you won’t have any tax liabilities, because the IRS doesn’t view the transfer as a withdrawal of your tax-deferred savings.