Moving to a New Job Without a 401(k)? Here Are Some Options for Your Old 401(k)

You’ll often hear that it’s wise to contribute money to a 401(k) plan if your employer offers one. First of all, many companies match 401(k) contributions to some degree. But even if you’re not entitled to a 401(k) match, it still pays to fund a retirement plan so you have a nest egg to fall back on once your career wraps up.

Meanwhile, now that a new year is upon us, a lot of companies’ hiring budgets are getting refreshed. And that means it could be a time to go out and get a new job.

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Of course, you don’t want to ignore your 401(k) if you separate from your employer. And in many cases, rolling your old 401(k) into a new one is your easiest bet.

But what if you land a role at a new company that doesn’t offer a 401(k) plan? Here are some options to consider.

1. Leave your old 401(k) where it is

Many 401(k) plans allow you to keep your money where it is, even if you leave your job and the sponsoring employer. Now you may need to have a certain 401(k) balance to have that option. But if so, it’s one to consider.

However, if you were never really a fan of your old employer’s 401(k), then leaving your money there probably isn’t your best bet. It may be that sticking with that plan will subject you to costly fees and limited investment choices. And if that’s the case, there’s another option to look at.

2. Roll your old 401(k) into an IRA

If your new employer doesn’t offer a 401(k) plan, it’s a good idea to open an IRA and save for retirement in that account. And once you open that IRA, you can roll your old 401(k) into it.

Now the easiest route to take in this regard is roll your old 401(k) into the same type of IRA. So if you had a traditional 401(k), rolling it into a traditional IRA could spare you a tax headache.

On the other hand, if you want the benefits that come with a Roth IRA, then you may decide to roll a traditional 401(k) into one of these plans. Just know that if you do so, you’ll be subject to taxes on the full balance you’re moving over. And that bill could end up being difficult to cover.

Make a decision either way

You may decide that leaving your 401(k) where it is makes the most sense once you get a new job. Or, you may decide to roll that money into an IRA that you manage yourself. There’s no right or wrong answer, but it’s a good idea to weigh your options from a cost- and investment-related perspective.

If you do decide to leave your 401(k) where it is and save for retirement in an IRA going forward, make sure you don’t forget about that old account. Rather, check in quarterly to see how your investments are doing, and pay attention to the fees you’re being charged to ensure that they aren’t getting out of hand and eating away at your returns.

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