When leaving a job, many people are unsure about what to do with their old retirement accounts. This can lead to a jumble of pensions, 401(k)s, and other retirement savings that are difficult to manage. Here are a few steps to consider:
- Leave It With Your Former Employer: You can choose to leave your retirement account with your old employer. This option works if you’re satisfied with the investment options provided and there are no excessive fees. However, it can become challenging to keep track of multiple accounts with different employers.
- Roll it Over Into a New Employer’s Plan: If your new employer offers a retirement plan and accepts rollovers, you can choose to roll your old account into the new one. This could simplify your finances by consolidating your savings.
- Roll it Over into an Individual Retirement Account (IRA): This is a common choice and for good reason. IRAs often offer a greater variety of investment options compared to employer-sponsored plans. Moreover, IRAs can be set up with any financial institution, giving you complete control over your retirement savings.
- Cash it Out: This should generally be your last resort. Withdrawing your retirement savings early can lead to penalties and a hefty tax bill. Also, you will miss out on the compound interest that could have grown your savings significantly over time.
Remember, it’s crucial to consult with a financial advisor before making any decisions. This ensures that you’re making the best choice for your specific financial situation and retirement goals. Additionally, it’s important to keep track of your retirement accounts and regularly review your investments to ensure they align with your risk tolerance and goals.
If you do decide to roll over or consolidate your old retirement accounts, be sure to carefully review the fees and investment options of the new plan or IRA. You don’t want to end up in a worse financial situation due to high fees or poor investment choices.
In summary, it’s essential to consider all your options when dealing with old retirement accounts. Leaving them behind may seem like the easiest option, but it could result in a scattered and less optimized retirement plan. Taking the time to evaluate and make an informed decision can greatly benefit your future financial stability and peace of mind. Don’t let your old retirement accounts become a forgotten part of your financial portfolio. Take control and make the most out of your retirement savings for a secure future. So, whether you choose to leave it with your former employer, roll it over into a new plan or IRA, or cash it out as a last resort, be sure to carefully weigh your options and seek professional advice when needed. Your retirement is a crucial time in your life, and it’s essential to make the best choices for a comfortable and secure future. So, keep these tips in mind when dealing with your old retirement accounts and take charge of your financial future. Happy retirement planning!
Matt Ward is a financial advisor and the president of New Century Investments, an independent investment advisory firm serving business owners, pre-retirees, and retirees in the Dallas-Fort Worth area and beyond. Matt is passionate about integrating investing, planning, and tax management into a holistic approach. Matt’s breadth of knowledge and experience in both taxes and investment management sets him apart, giving him the ability to design, advise on, and manage business strategies, tax efficiency, and retirement planning. He is known for his care and attention to detail and works hard to develop personal relationships with each of his clients so they can benefit from his customized service and guidance. He loves walking with his clients through their financial journey, supporting them and celebrating with them as they reach their goals.
Matt graduated from Texas Tech University with a bachelor’s degree and is a certified financial planner™ and chartered retirement planning counselor℠ professional. When he’s not working, you can find Matt hiking, playing the guitar, and spending time with his family. To learn more about Matt, connect with him on LinkedIn!