You’re not alone in this fear, but you have choices of what to do with your 401(k).
Leave your 401(k) alone. The money remains invested in your former employer’s plan, if permitted. There are potential drawbacks, however: your investment choices may be limited, the plan fees may be high, and you may not be able to quickly access your money or do what you want with it.
Withdraw the money. This comes with a financial penalty, and it may be a “last resort.” Distributions from a regular, non-Roth 401(k) are defined as taxable income by the Internal Revenue Service. A 10% additional tax usually applies if you make a withdrawal prior to age 59½, but the 2020 CARES Act waives the 10% early withdrawal penalties on 401(k) plans, giving some account owners up to three years to replace what they took out.1
Roll it over into an Individual Retirement Account. Moving the 401(k) assets into an IRA via a rollover or trustee-to-trustee transfer. This isn’t perfect for every financial situation, but it may be the one with the most positive outcome for you.2
Roll the assets over into a new employer’s plan. Some employers permit this. If the new workplace retirement plan has higher fees and reduced investment choices compared to your old one, you might be better off leaving your savings in the old plan.
How is your money positioned? How are you invested today? How prepared would you be if you lost your job? Are you doing things designed to preserve and enhance your retirement money? You may want to talk about your options.
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1 – IRS.gov, October 29, 2020
2 – Investopedia.com, January 18, 2020
This material was prepared by MarketingPro, Inc. for use by Nisivoccia Wealth Advisors.