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A Census Bureau survey shows millennials change jobs every 3.2 years. Many of them saved a little in the company retirement plan in order to get the match. What should they do when they leave the company for bigger and better opportunities? Should they cash it out to fund the move? Should they roll it into a plan with more options?
Lisa Emperador of LisaVsTheLoans.com is a young professional with $8,000 in an old 401(k). She had several options for what to do with the money when starting with a new company.
Lisa has a bunch of debt and could have cashed it out to pay down a car loan or credit card debt. Instead, she chose to roll it into a ROTH IRA managed through Betterment.
Was this the best option? Listen to find out if she is happy with the move or regrets her decision.
What could you do with an old 401k?
You can’t do anything with a 401k while working for the company. However, you have several options for what you can do after you leave. I recommend you move the money out of the old plan.
Company plans are limited in the number of investing options and you don’t have as much control. Even more importantly is the need to move it into another retirement plan or pay a large amount of income taxes and penalties.
What would you do with an old 401k? Listen to this episode to understand the differences:
Move it into your new company’s 401k
Pro: The easiest way to move money out of one retirement plan into another.
Con: You are limited to only a handful of investing options
Leave it with the financial management company
Pro: Many more investing options. Also an easy way to make the move.
Con: You have to make the investment choices by yourself or hope the person on the phone knows your financial situation
Move it to a self-managed company
Pro: Many, many more investing options. You have more control over the account.
Con: YOU control the account. Investing regrets are just a click of the Enter-button away
Move it to a trading account
Pro: Fun and much more control
Con: You could lose your shirt in trading fees!
Work with your financial advisor
Pro: Many more investing options. Personalized advice. They help make the money transfer into your account.
Con: Fees may be higher.
Disclosure: Please contact a trained professional before making any big financial moves.
Links mentioned in this segment:
Note: I have an affiliation with Betterment that also gives you the first month free using this link:
http://betterment.com/invite/stevestewart
https://investor.vanguard.com/mutual-funds/select-funds
https://www.fidelity.com/fund-screener/research.shtml
How do the rich get richer?
1) They spend less than they make
2) They work with professionals, consultants, tax experts, and coaches
3) They buy things wisely
4) They do what they say
5) They give
The secret ingredient? They stick to their moneyplan.
Click here to read the entire transcript
Other articles and interviews mentioned:
I was interviewed on the Dadrenaline Podcast.
Jared Easley may have mentioned me a dozen too-many times on an interview on Cash Car Convert.
What’s wrong with getting rid of credit cards? – my article on Liberty Investor.
Keep workin’ your moneyplan like @BizMarkie – my article on Enemy Of Debt.
Please leave your comments below. Have a PRODUCTIVE day!
