Posted on August 17, 2006 at 17:22:34:
Whether you’ve been in a job a few years or a few decades, the money in your 401(k) ought not be wasted. It’s been tax-protected up to now. Don’t lose the advantage.
What are the options? You could leave the money where it is. Make certain that the same investment options are still open to you. If the account is below $5,000, the employer can insist you leave. You could roll over the funds into an IRA. This offers the widest investment and beneficiary choices and might save on fees if you consolidate the funds into one IRA account. Third choice is to roll over the money into your new employer’s 401(k) if you like the investment choices. One advantage in a 401(k) is the right to borrow your own funds if you need emergency money.
The fourth option, and the worst, is to take the money and run. The immediate cost is tax on the payout plus an early-withdrawal penalty. Greater yet: the tax-deferred growth of the money later.