Americans typically encounter the situation pension savings, typically the biggest financial asset in their lives could be with their former employer long after they’ve cut relations. If you’ve had to change jobs multiple times it is possible that you’ll end up having multiple retirement accounts with different employers. What should you do with those old retirement accounts?
Choose the best option that meets your requirements
There are generally four options for managing retirement accounts from the past. You can choose to leave the accounts in their current state (assuming you’re allowed by the old plan) or you can transfer the funds that were accumulated to the new account (assuming it’s permitted by the current plan) or you can withdraw the old money (understanding that there could be penalties) You can also put it all in an IRA.
The transfer of your retirement accounts to the IRA (Individual retirement Account) is typically the best option. This not only consolidates your investments into one spot which makes it easier to track as well, however, IRAs generally offer better options for investing and are more flexible as compared to the 401(k). Transferring your IRA to an 401(k) is somewhat difficult and if you make the mistake of doing it wrong, you could end up paying an interest.
Be sure to understand your options as well as the implications of each prior to making a choice. Think about speaking to an expert in retirement if you require additional advice.
Find a brokerage company
You’ll need to pick the right brokerage company that you can trust, so conduct some research prior to deciding the firm you’d prefer to choose.
If you have existing an account with a retailer, then you might decide to open an accounts with that company. In certain instances you could get discounts in the event that your assets exceed the minimum amount. Be aware of fees, such as low balance fees as well as annual fees. Then, choose the account that has features that meet your requirements.
Contact the administrator of the plan. start the rollover
Once you’ve picked an account with a brokerage firm and you’ve established the account, make contact with the administrator of the plan you’re interested in and request direct rollover. Direct rollovers mean that the earnings of the funds in your 401(k) account is transferred direct to an IRA trustee, not to you. This can save you moneybecause if funds were to be sent to you and tax withholdings were withheld, they are not kept and you could be penalized.
Choose your investments
After the money is deposited in the new bank account you might need to consult with the brokerage company to discuss what you’ll do with the put your money to work. With an IRA typically, you enjoy a lot of flexibility in the investment options available to you, so you’ll need to create an investment plan that is compatible with your objectives.
If you decide to rollover the account you have, you could be tempted to utilize the assets to pay for current obligations. Be aware that by using retirement funds to pay for your current expenses and you’ll not only risk your retirement security but also be being subject to tax withholding as well as (often extremely high) penalties.
There’s a lot you need to know regarding retirement plans. If you’re looking for more information, check out IRS.gov for valuable information or speak with a professional financial planner.
