What to Do With Rollover Funds - 3 Options for Deciding What to Do With a 401K Account
What to do with rollover funds? That is a question that can come up a number of times during your working lifetime.
As a result, the answer to the what to do with rollover funds depends greatly on where you are in your career path and what you future plans are.
Before you do anything though, you should be aware that in a number of cases you are not required to do anything with certain monies from retirement plans.
In fact, sometimes doing nothing at all may be your best option.
Option 1: Do Nothing Many employers won't tell you this (although it is their obligation to inform you of your rights), but people with more than $5000 in a 401K plan at their employer are not required to move their funds out of the company's 401K plan.
Employees with more than $5000 in their 401K account have a right to keep those funds in the plan, even after they have retired or been fired/terminated.
Sometimes your employer does not want you to know that the law is on your side and downplay or "forget" to inform you of this right.
The point is if you like where your money is and don't want to move it - in many cases you don't have to.
Sometimes the best action to take is no action at all.
If you have less than $5000 in the account, your choice is to move it into an IRA account or IRA CD account or take a cash out (tax penalties will likely apply in the cash out).
What to Do with Rollover Funds If You Want to Move Them If Staying in the Workforce When you are fairly certain you want to move money out of your 401K account what you actually should do with it depends a great deal on your future plans.
If you were terminated and plan on re-entering the workforce, odds are you would be best served to leave your 401K money in your prior employer's plan until you can move it to your new employer's plan (presuming the new employer has a plan - most do these days).
The advantage of waiting it out is the luxury of being able to take a loan out on your previously accumulated money in the old plan when you move it to the new one.
What to Do with Rollover Funds If You Want to Move Them If Leaving the Workforce Here your options are much more diverse.
There are many choices for someone who has left the workforce and wants to move their money out of the company plan.
The rules regarding what to do with rollover funds leave a fair number of choices including several types of IRA accounts, several allowed withdrawal plans, and a lump sum withdrawal.
In most cases the lump sum cash out is the worst alternative.
More likely your better alternatives would be some form of IRA or slowly taking distributions from the original 401K plan.
As a result, the answer to the what to do with rollover funds depends greatly on where you are in your career path and what you future plans are.
Before you do anything though, you should be aware that in a number of cases you are not required to do anything with certain monies from retirement plans.
In fact, sometimes doing nothing at all may be your best option.
Option 1: Do Nothing Many employers won't tell you this (although it is their obligation to inform you of your rights), but people with more than $5000 in a 401K plan at their employer are not required to move their funds out of the company's 401K plan.
Employees with more than $5000 in their 401K account have a right to keep those funds in the plan, even after they have retired or been fired/terminated.
Sometimes your employer does not want you to know that the law is on your side and downplay or "forget" to inform you of this right.
The point is if you like where your money is and don't want to move it - in many cases you don't have to.
Sometimes the best action to take is no action at all.
If you have less than $5000 in the account, your choice is to move it into an IRA account or IRA CD account or take a cash out (tax penalties will likely apply in the cash out).
What to Do with Rollover Funds If You Want to Move Them If Staying in the Workforce When you are fairly certain you want to move money out of your 401K account what you actually should do with it depends a great deal on your future plans.
If you were terminated and plan on re-entering the workforce, odds are you would be best served to leave your 401K money in your prior employer's plan until you can move it to your new employer's plan (presuming the new employer has a plan - most do these days).
The advantage of waiting it out is the luxury of being able to take a loan out on your previously accumulated money in the old plan when you move it to the new one.
What to Do with Rollover Funds If You Want to Move Them If Leaving the Workforce Here your options are much more diverse.
There are many choices for someone who has left the workforce and wants to move their money out of the company plan.
The rules regarding what to do with rollover funds leave a fair number of choices including several types of IRA accounts, several allowed withdrawal plans, and a lump sum withdrawal.
In most cases the lump sum cash out is the worst alternative.
More likely your better alternatives would be some form of IRA or slowly taking distributions from the original 401K plan.
Source...