What Can You Do With Your 401k When You Quit?
401k’s are great because you can save for his future, which is an option not everyone in the world has available to them. If you’ve been working for a company, then you most certainly know what a 401k is. Most companies sponsor this retirement plan, and an employee can benefit from it by contributing a certain percentage of their salary. The most common 401k plan is company- sponsored, which makes people confused on what to do if and when they leave their company. Well, you actually have a couple of options, and here’s a look on each one.
WITHDRAW CASH
If you are leaving your current employer, you could actually have your plan administrator write you a check for the whole amount. You get to keep the money, but not all of it. While some people who are in dire need of money turn to this option, this is not the best thing to do. If you decide to handle your 401k account this way, 20% of the entire amount will be deducted to serve as a tax payment, plus you would also need to pay 10% more as tax penalty come tax season.
401K ROLL OVER TO THE NEW EMPLOYER
A 401k direct rollover is a very good option. Should you choose to rollover your money, your current company (whom you will be leaving soon) would just need to send the amount over to your new company, and your new company will be the new account administrator. No penalties to pay, although you need to carefully consider if your new company has a good fund selection.
LEAVE THE PLAN AT THE CURRENT EMPLOYER
If your current company is offering a good plan, we suggest that you leave your account with them. This way, you know what you are going to get once you retire. The only drawback here is that you would need to pay the company a certain amount for keeping your account, and not all companies offer this.
Tags: 401k account, 401k plan, 401k rollover, rolling over your 401k
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