Last week, a visit to my mailbox yielded some bills, junkmail , and a statement from the company that manages the 401k retirement account from my old job. In my excitement to start working at the Federal Citizen Information Center , I neglected to move the money in my 401k from my last job, so it’s just sitting dormant and collecting dust (and no interest). Oops.
The good news is that if you leave a job, the money in your 401K retirement plan is portable. Plans vary from employer to employer, but you should be able to take all the money you contributed as well as some (maybe all) of the money your employer contributed. You have a few options available to you:
Option 1: Move the money directly to another 401k or employee retirement account at a new job, sometimes called a “rollover.” Option 2: Move the money directly to a traditional IRA account. Option 3: Receive a check for the amount of money in your old 401k.
If you choose options 1 or 2, you won’t have to pay any taxes on the money from the account. However, option 3 will require you to pay a mandatory 20% tax on the amount of money you received from the old retirement account, as well as a 10% early distribution tax if you are younger than 59 ½ years old. This is definitely incentive to keep my money in a retirement account!
I contacted the company that manages my orphaned 401k account, and apparently the process of moving the money is fairly easy, so I have no more excuses. And in the long run I’ll benefit from committing to my retirement savings plan.
Which option would you choose to maintain your retirement savings? Why?
Last week, a visit to my mailbox yielded some bills, junkmail , and a statement from the company that manages the 401k retirement account from my old job. In my excitement to start working at the Federal Citizen Information Center , I neglected to move the money in my 401k from my last job, so it’s just sitting dormant and collecting dust (and no interest). Oops.
The good news is that if you leave a job, the money in your 401K retirement plan is portable. Plans vary from employer to employer, but you should be able to take all the money you contributed as well as some (maybe all) of the money your employer contributed. You have a few options available to you:
Option 1: Move the money directly to another 401k or employee retirement account at a new job, sometimes called a “rollover.”
Option 2: Move the money directly to a traditional IRA account.
Option 3: Receive a check for the amount of money in your old 401k.
If you choose options 1 or 2, you won’t have to pay any taxes on the money from the account. However, option 3 will require you to pay a mandatory 20% tax on the amount of money you received from the old retirement account, as well as a 10% early distribution tax if you are younger than 59 ½ years old. This is definitely incentive to keep my money in a retirement account!
I contacted the company that manages my orphaned 401k account, and apparently the process of moving the money is fairly easy, so I have no more excuses. And in the long run I’ll benefit from committing to my retirement savings plan.
Which option would you choose to maintain your retirement savings? Why?