“What should I do with my 401(k)?” is a common question we get. In the COVID era, we get it more than we’d like. Most people make this big mistake. Here’s how to avoid it.
How to take control of your 401(k) after leaving a job
What should you do with a 401(k) from a previous employer?
On this episode of Queer Money®, we explain why you shouldn’t take an early distribution from your retirement account unless you absolutely must, describing what our advice would be under normal circumstances and how things are a little bit different right now based on provisions in the CARES Act.
We walk you through the two ways to roll over a 401(k), discussing why we recommend transferring your money to an IRA rollover account rather than into your new company’s employer-sponsored retirement fund.
Listen in for insight on growing your retirement account with smart investments and learn what three steps you can take to move your old 401(k) into a shiny, new IRA rollover account!
To reduce your expenses and have more control, roll your 401(k) into an IRA rollover account. – John Schneider of Debt Free GuysClick To Tweet
Topics covered on what to do with your 401(k)
Why you shouldn’t cash out your 401(k)
• Pay 10% penalty if under the age of 59½
• Pay taxes on the amount taken out [unless Roth 401(k)]
Why you shouldn’t cash out your 401(k)
• Still have to pay taxes on the amount taken out
• Only take early distribution if lost job or earning significantly less
How the CARES Act impacts the tax consequences of cashing out a 401(k)
• Waives 10% penalty if under the age of 59½
• Provision to spread out taxes through 2022
The 2 ways to roll over your 401(k)
1. Move into new company’s employer-sponsored retirement account
2. Transfer to IRA rollover account
How to move your former employer’s 401(k) into an IRA rollover account
1. Contact brokerage and ask to open an account on your behalf
2. Contact old plan administrator or former HR department to initiate a rollover
3. Make sure to get your money invested
How to transfer money from a 401(k) to an IRA rollover account
• Direct transfer—send old admin new account number and name of new brokerage
• Mail option—ask to make check payable to new brokerage firm on your behalf
Why we recommend the IRA rollover vs. your new company’s retirement account
• Higher fees associated with employer-sponsored plans
• IRA rollover offers more autonomy, investment choices
Resources to help you with what to do with your 401(k)
