No Funds Left Behind
If you’re like most people, you have moved around to different jobs, or changed careers over your working years. According to a January 2018 report from the Bureau of Labor Statistics, the average person changes jobs 10 to 15 times during his or her career. While not every employer offers retirement plans (401(k), 403(b), 457, etc.) many do, and that means you likely have assets floating around in the universe.
So, what should you do with them? There are several options. You may be able to roll it into your new 401(k) at your new employer; roll it out into an IRA or cash it out (NO!!!!). If you have more than $5k invested in the old 401(k), most plans allow you to leave it where it is, even after you leave. If you have less than $5k, they often ask you to take it with you, and they are supposed to assist you in setting up your own IRA.
Rolling an old 401(k) into a new employer’s plan is a good idea if your new employer’s plan is well structured and cost-effective. Consolidating your assets and keeping track of them is important.
I’m here to talk to you about one of the biggest problems I see daily... leaving it with your old boss. There are several reasons why I don’t think that is a good option. First, employer sponsored retirement plans are limited in the scope of the investment options. So, for that reason alone, it is often better to move your money into an IRA where there are far more choices for you to choose. Second, and more importantly, by leaving your assets scattered about the universe at different jobs (an average of 12) you have no idea what you have, what it is invested in, how much it totals. That makes it even more difficult to understand a long-term investment strategy because there are no hard numbers to work with.
For most Americans, their 401(k) is one of their larger retirement assets, so this is not something we should just leave to chance without having control over.
The rollover process into an IRA (Individual Retirement Account) is the same as a rollover into a new 401(k). You can either have the plan administrator do it directly, sending the money into your new IRA, or you can take a distribution and have it deposited into that IRA within 60 days. I recommend you work with a financial advisor to make sure you don’t find yourself creating a taxable event, by not getting the money into the new account within that 60-day window.
So, the moral to this story is... when you find yourself changing employers or changing careers, make sure there are “No Funds Left Behind.”