Changes to your employment also mean changes to your 401(k) plan. If you are transitioning to a new employer, you should consider the best way to handle the money in your old 401(k) plan.
Labor Changes, Finance Changes
With the onset of COVID-19, many of us were forced to adjust quickly as furlough and unemployment rates skyrocketed. But as summer progressed, reports showed signs of some economic recovery. In July, the U.S. Bureau of Labor reported that unemployment hit 10.2 percent. Furlough rates also improved with the total number of furloughed workers dropping from 18 million in April to 9 million in July. This means that Americans are finding new jobs, despite COVID.
A new job relieves the uncertainty of unemployment and brings a new sense of excitement, but if you had a 401(k) plan with your former employer, you need to consider how to manage these funds before moving onto this new chapter. Though some people leave their accounts with their former employer, adopting this “set it and forget it” approach is not necessarily the best option.
Rollover, Rollover – Send My Money Right Over
When deciding what should come next for your 401(k) plan, you’ll want to consider all your options; however, in many cases, rolling over your funds could be the best strategy to keep your retirement goals on target. There are two ways to rollover your 401(k):
New Employer Plan
If your new employer allows it, rolling your old account into a new employer plan could be an effective and fairly simple process. Keep in mind that the fees may be higher in your new employer’s plan and that your investment choices may be more limited.
Whether moving to a traditional IRA or a Roth IRA, the benefit to this option is that you can move your money without additional penalties or taxes. When rolling your funds into an IRA, you should confirm whether your 401(k) plan is a Roth 401(k) account or a traditional pre-tax 401(k) account. This step will help you consider your tax liability.
As you research and weigh options, it’s also a good idea to be aware of new technologies and how they could benefit you. Auto portability, for example, allows automatic transfers of smaller 401(k) funds, moving these funds from a former employer to a new employer’s plan with ease. Auto portability has gained traction recently, with reports claiming it could keep as much as $2 trillion in the U.S. retirement system.
What’s Right for You?
The best option depends on your unique situation. Rolling over your 401(k) can be straightforward with the right planning. Wickham Financial & Insurance Services’ team of advisors can guide you toward the option that will work for your situation. Our experts assist you at every step, ensuring your funds roll over without any unexpected consequences. Contact us today to start planning for your financial future, and if you’d like to learn more about rollover options, be sure to watch our “401k Rollover Options When Leaving a Job” video on our Informational Videos page.
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