Leaving it with your previous employer’s plan
The decision to leave your balance with your ex-employer can be a good option if the plan offers you a variety of low-cost and solid-performing investment options. According to the Profit Sharing/401(k) Council of America, if you have $5,000 or more in your plan, your ex- employer must allow you to leave in that current plan until you turn 65 – so don’t feel rushed about moving it. However, if you do decide to leave your 401(k) with your old employer, just don’t forget about it.Moving it to your new employer’s plan
If you don’t like the option of leaving your money with your previous employer (for whatever reason that may be), then consider rolling the balance over to your new employer’s plan (if they have one that accepts rollovers).Rolling it over to an individual retirement account (IRA)
According to the Bureau of Labor Statistics, people who were born between 1957 and 1964 on average have held 11.7 jobs before they reached 48 years old. If you have changed jobs or are considering a change and you prefer the convenience of having all of your accounts in one place as you switch employers, you may choose to roll your 401(k) plan over to an IRA at a local bank, credit union, or financial investment firm. Remember, this doesn’t mean you can’t contribute to a new plan at your next job, so continue to take advantage of any employer sponsored retirement plans. In the meantime, your old funds can continue to grow in your new IRA even if you don’t add money to them. This option may make it easier to pool everything in one account as you switch companies.
Cashing it out
If at all possible, try to avoid this option. Unless you have some sort of extenuating circumstance, you’ll most likely regret making this decision. If you decide to cash out now, not only will you be subject to taxes, but if you’re under age 59 1/2, you'll get slapped with a 10 percent early withdrawal penalty to boot.
For more information on retirement plans, visit the Protective Learning Center.
