Americans are resigning in record numbers, establishing a new benchmark for resignations last year.
According to a recent study, however, they leave behind neglected 401(k) accounts containing an average of $55,400. Capitalize, a financial services company, reports that approximately one-fifth of American employees have either abandoned or forgotten their 401(k) accounts.
When you leave your employer, you have four options for your 401(k):
- Give it to your former employer.
- Use the money.
- Transfer the funds to an individual retirement account (IRA).
- Combine it with the 401(k) plan of your new employer.
Inactive 401(k) accounts are not entirely positive. They are comparable to a missing sock in the laundry; their whereabouts are unknown. Moreover, administrative fees can diminish savings.
Consolidating Old 401(k)s: Benefits and Steps to Consider
It may be prudent to consolidate old 401(k)s into a single retirement account, such as an IRA or new 401(k).
It is easier to manage, eliminates fees, and may offer superior investments. Prior to consolidation, you must locate any neglected accounts. If you find yourself pondering, “Did I have a 401(k)?” – consult HR. Or, if you have ancient documents, they will have account information.
Americans are resigning in record numbers, establishing a new benchmark for resignations last year. According to a recent study, however, they leave behind neglected 401(k) accounts containing an average of $55,400.
Transfer and Withdrawal Options, and Retirement Planning Considerations
If you’re trapped, the Department of Labor’s database of abandoned plans may be of assistance. Once you have this information, contact the administrator to transfer funds. Transfer to your new employer’s plan or existing IRA. Or, withdraw the funds, but expect taxes and possibly a penalty if you are younger than 59.
If your hoard is less than $1,000, your former employer may cash it out. Up to $5,000 could be contributed to an IRA. Helpful tools include FreeERISA.
Remember to contribute to your 401(k). Ensure your retirement funds are in order, regardless of whether you are changing employment, retiring, or something else.
Consider your options: staying put, transferring to an IRA, a new job, or cashing out. It’s not just pocket change, so deliberate carefully.