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Retirement Plan Specialists

Former Employer 401(k) Plan

According to the Bureau of Labor Statistics release published in Aug 2019, people born between 1957 to 1967 have held an average of 12.3 jobs between the ages of 18 and 52. Often a few, if not more, of these jobs provide employer sponsored benefit plans. It is normal to see clients have more than one retirement account from their current and old employers. Thus, asking the most important question…

What do I do with my former employer retirement plan?

Well, the answer is not quite that simple but, depending on the plan, there are quite a few options available to you.

Here are four choices to consider:

Keep your assets with your former employer. Most companies but, not all, allow individuals to keep your retirement savings accounts in their plan after you separate.

Rollover your funds into your new employer’s plan. Most companies will allow individuals to transfer-in funds from their previous employer’s retirement plan into the new company’s plan.  This option should be carefully evaluated since most plans will not allow you to take those funds back out or roll them into an Individual Retirement Account (IRA) until you separate from your current employer or you turn 59 ½ years old. 

Cash out. Pay the taxes (and penalties). You might be tempted by cashing out your 401(k) and using the money. We highly recommend against making such a decision for two very important reasons. The first being that you may have to pay penalties if the withdrawal occurs before you are 59 ½ or if you separated from the company before you attained the age of 55. When you withdraw the funds early from a 401(k), you will pay a 10% early withdrawal fee, along with federal and state income tax. Secondly, by withdrawing from your retirement early, you are losing out on the long-term growth opportunities and taking from your future.

Rollover your funds into an IRA for private wealth management. Opening an IRA account and rolling your former employer plan assets into the account could be the best option for a few reasons including convenience, flexibility of investment options, potentially lower cost fund options, and hiring an advisory team who actively watches and manages your assets for you.   

It Only Takes 4 Simple Steps to Get Started!

  1. Meet with our advisory team.
  2. Choose a new account for your assets.
  3. Fill out paperwork.
  4. Discuss asset allocation recommendations.

Although a 401(k) is the most common employer sponsored benefit plan, there are numerous other types of employer sponsored benefit plans. If you are uncertain what you can do with your former employer account(s) and want to look at ways to best manage and consolidate these assets, please reach out to our firm for scheduling by using our contact form.

Rollover your 401(k) with confidence. Our advisory team at Capstone Wealth Advisors is very familiar with helping individuals in all areas of retirement planning and are here to help you through your journey to a sound financial future. We help clients navigate the ever-changing realm of retirement planning in a way that is straight forward and concise.

Why could a rollover into an IRA be the most beneficial option for me?

There are many reasons to consider moving your old employer 401(k) into an IRA. Some of the key things to consider is:

  • Diversification
  • Support & Guidance
  • Fees & Expenses
  • Convenience & Time
  • Broad Range of Investment Options

Often, an employer plan only offers limited investment options which does not allow the employee to diversify or invest in all areas they would likely consider. In an IRA, the investment options are significantly greater. Additionally, finding an advisor you can work with allows you to spend less time researching the investments and leaving the discretion to the professionals so you can focus on what you like to do and we can focus on doing what is best for you.

With an IRA, you can keep adding 401(k)s and other former employer sponsored plans throughout your career.

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