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.
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:
- 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.