What to Do with a 401k After Leaving a Job

An accomplished financial advisor Robert Gill serves as the president of EPIC Wealth Management, an independent brokerage firm in New Jersey. Robert Gill of New Jersey provides clients with a variety of services, including assistance with estate and retirement planning.

On average, Americans change jobs 11 times throughout their careers according to the Bureau of Labor Statistics. Most companies offer a 401(k) retirement plan to employees but the latter tends to leave their accounts as is when they switch jobs. Leaving the account is the easiest option and is suitable for accounts that have at least $5,000 in them. When accounts have less than $5,000, companies may force the account out by helping employees set up an IRA to host the money instead. For accounts with less than $1,000, companies may issue a check to a former employee instead of keeping the 401(k).

However, leaving a 401(k) is not always the best option. Having multiple 401(k) accounts not only creates confusion come retirement, but it also increases the risk of individuals forgetting about some accounts and ceasing to rebalance or manage them. To prevent this from happening, individuals can roll over their 401(k) to a new employer’s plan and consolidate multiple retirement accounts without taking a tax hit. Furthermore, having a single account makes managing the account easier over time. Moving the money to an Individual Retirement Account (IRA) is another option for the old 401(k) plans. By doing so, individuals increase their investment options while improving their ability to control their accounts.