Profitt Report: When you leave your job, here's what you can do with your 401(k)

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    If you want to sit on a beach and relax after retirement, you’ll need to plan accordingly. Your company’s 401(k) is a common way to save but what happens to that money when you leave your job?

    Your options depend on two big factors: your age and current financial situation. Pensions are on the decline and the future of social security in question, so employer-sponsored 401(k) plans are a popular money-saving tool.

    “It’s very common, most employers offer 401(k)s or depending on your industry, 403b, 457,” said Jason Cryderman of Great Lakes Investment Advisors in Midland.

    He said they face this question a lot: when it’s time to leave your company, what happens to that money you’ve been contributing?

    “We work with a lot of people here working for Dow that have either chosen to leave or been forced out with the merger of the companies,” Cryderman said.

    Your first option: leave the money where it is! There may be a minimum balance required to leave the money there. One of the upsides of this option is you are familiar with the program and know how it works.

    “One of the downsides of leaving the money inside a previous employer's 401(k) plan, you may have limitations and restrictions on the options they give you to invest,” Cryderman said.

    Your second option: roll the money into your new 401(k) account.

    “It depends on the employer,” Cryderman said, “not as many employers allow that but some of them do. That's definitely one option if they'll allow you to put it in there.”

    Your third option: take the money and roll it into an IRA. The big draw of an IRA is the flexibility and they sometimes cost less in fees.

    “You put it in our own self-directed IRA, you own and control the plan as opposed to the previous employer. You choose the custodian, you get to pick the funds available out there in the market place,” Cryderman said.

    Here’s something else to keep in mind: typically, there’s a ten percent penalty for accessing your 401(k) money early but Cryderman said if you’re 55-years-old and need money, it might be smart to leave your 401(k) with your previous employer.

    “Between 55 and 59 and a half you can access that money with no ten percent penalty,” he said, “but once you take that money out and roll it into an IRA, you now an not touch it until 59 and a half without that ten percent penalty.”

    When in doubt, always consult a financial professional.

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