A: If you’ve been at your previous job for a few years, you’ll need to decide what to do with your old 401K plan. If you aren’t careful and make a mistake in the way you handle the account, it could cost you in taxes and penalties, not to mention how it could affect your retirement planning.
The one rule most experts agree upon is this: Do not cash out your 401K. It’s simply not worth the financial hit you will take in fees, taxes and penalties.
Here are a few better options to consider:
Leave it with old employer: Do your research into whether the old plan is that much better than a new plan being offered by the new company. Weigh the benefits of staying put.
Roll it into the new company’s 401K plan: According to experts, most mistakenly believe they will incur penalties if they opt for this. That is not the case. But before automatically rolling your existing 401K into your new plan, do the research and compare.
Roll into an IRA: Experts say IRAs can be a way for individuals to take greater control of their retirement plans. Consider getting professional advice regarding whether this is the best course of action to meet your retirement goals.
