Don’t Let Your Retirement Savings Slip Away
As I’ve learned the hard way, ignoring your pension or 401k account when you switch jobs can lead to trouble. It’s like letting dirty dishes pile up in the sink – eventually, they’ll become a big problem. In my early twenties, I was busy job-hopping and trying to make ends meet. I knew I needed to start saving for retirement, but it wasn’t until I landed a full-time job with great benefits that I took control of my savings.
The Importance of Starting Early
The money you put away now is worth much more than what you’ll save ten years from now. I started investing a small portion of my paycheck into a voluntary retirement plan, and it gave me a sense of security about my future. But then, I received a job offer to move across the country and work for a large corporation. In the chaos of relocating, I forgot about my tiny retirement account.
Don’t Forget to Roll Over Your Funds
When I finally opened the small white envelope that had been forwarded to my new address, I realized I had almost missed the deadline to roll over my state account funds. I quickly contacted my old HR department, and they helped me set up a new, separate Roth IRA. Phew!
What to Do with Your Funds
Now, I’m contributing to a 401k fund sponsored by my new job, in addition to my personal Roth IRA. If I were to leave my job, I could leave my funds where they are or roll them over into my personal Roth IRA. Here are some options to consider:
Cash Out (But Be Careful!)
Cashing out your fund might seem tempting, but it can trigger taxes and penalties on your investment. This money is meant for retirement, and most plans make it difficult to access before age 55 or 65. The penalties for cashing out include tax penalties and fees that eat into your principal amount.
Leave the Money There
You might be able to leave the money in your old account, but make sure to talk to your representative about this option. Check the fees charged by the management company, and ensure you’re not throwing your money away.
Move the Money to Your New Company’s 401k
You may be able to consolidate 401ks and move the money into your new account without penalty. Just ensure your old plan doesn’t cash out your fund, triggering taxes and penalties.
Roll It Over into an IRA
If you’re not continuing employment or your new plan doesn’t allow transfers, you can move your old company 401k into an IRA or Roth IRA. Talk to your banker about opening this account and ensuring the 401k fund isn’t cashed out.
Act Sooner Rather Than Later
A job transfer is a ticking time bomb for your investment. Don’t ignore it without damaging your future! Talking to your financial adviser, bank, or HR rep will make the difference between keeping and losing your savings. Think of this administrative task as an investment in your future self.
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