"What are my options for my 401k when changing jobs?"

It's estimated that the average person will have 12 different jobs in their lifespan. That means we are likely to contribute to several different employer retirement plans during that time. Waiting until retirement to assess your retirement funds can be costly. Many investers find it easier to consolidate those accounts in order to implement an efficient investment strategy. When switching jobs, there are several options available for handling your 401k.

Option 1 : Consider transferring your funds to a rollover IRA for increased investment flexibility and fund consolidation. It is important to choose a brokerage that offers a variety of low-cost investment options. Fidelity, Vanguard, and Betterment are recommended for their excellent investment choices, allowing you to create a diversified portfolio at a reasonable cost. Opting for Fidelity or Vanguard, which are commonly associated with 401k plans, can simplify the rollover process if you choose to open an account with them.

Option 2 - Roll the funds into your new employer 401k. If your new employer has a great 401k plan this might be a good option. It allows you to consolidate your retirement funds, so you don't lose track of them. If you're a DIY investor, it might be easier to implement investment strategy with all of your funds located in the same account. If you decide to move your funds to the new 401k plan, ensure close collaboration with the plan administrators. Not adhering to the transfer regulations could result in tax implications.

Option 3 - Retain the funds with your previous employer. This choice is typically viable if you are satisfied with the investment opportunities within the plan. It is also the most convenient alternative, requiring no effort on your part. It is important to bear in mind that if the amount is below $5,000, you will probably need to transfer the funds. Several aspects to take into account... Verify that the plan does not impose annual charges. Ensure your designated beneficiary is current. Lastly, keep your account details easily accessible. Avoid losing sight of your retirement savings.

Option 4 - Cash out the retirement account. This choice can be expensive, as it involves taxation of your funds as income and a 10% early withdrawal penalty if you're under 59 1/2. Importantly, this option does not allow your funds to continue growing for the future. While cashing out your retirement funds is a possibility, it is advisable to avoid it if you can.