Here’s how to hang on to your 401(k) plan funds: Don’t take the cash.
Cashing out your 401(k) and getting a nice big check when you leave a job is tempting.
Whatever you do, make sure that only a small percentage of your savings is invested in any one company, no matter how much faith you have in that business.
And we love hearing stories from folks who are gazelle intense about paying off their mortgage—sweating, selling and sacrificing to become debt-free.
Roll your 401(k) into a traditional individual retirement account.
Set up a traditional IRA through a low-cost mutual fund company like Vanguard or Fidelity or a discount brokerage like TD Ameritrade or Charles Schwab Sure, this means you may wind up with two retirement accounts—if your new employer offers a 401(k) plan—but you’ll have more flexibility to choose the investments you want.
One example of gazelle-intensity-gone-wild is using your 401(k) to pay off debt.
Listeners call into The only time he might say to consider it is if it’s to avoid bankruptcy or foreclosure.
The annual expense ratio on each fund shouldn’t be more than 0.75%, Dorsainvil says. Make sure you take the right steps with your 401(k) before you change jobs to preserve the tax advantages and to keep that money growing until you retire. The yearly contributions you’ve smartly made to your 401(k) plan will help you retire in style and keep your taxes down until then, and they belong to you when you leave—and that includes any dollars your employer added to the account.And your fees will be low if you stick with low-cost exchange-traded funds and index funds, which you should.Government efforts are leading to lower fees at 401(k) plans (which can run as high as 5% at smaller companies, says Brightscope), but you shouldn’t have to worry about administrative costs if you set up your own IRA.
If you’re 30 years old today, for example, that $7,500 you paid in taxes would be worth more than $50,000 by the time you’re 65 if kept in a retirement account earning 7% a year. Some plans allow you to keep your 401(k) plan even after you leave, but don’t consider this a long-term solution.