401K

[LittleKagsin]

So, random question, since I have no clue what I'm doing.

At my current job, I have a 401K, it's all great and whatever. HOWEVER, I am getting ready to leave my job and find something new. What..happens to my 401K if my new job doesn't have one? Do I get a big ass check that I deposit and just let chill in my bank account? (Then have to pay mega taxes on, of course.) Does it just stay where it's at and then I roll it over to where ever when I finally get another job that has a 401K option? Help me. I am dumb.

 

[strawman]

Generally you should let it chill until you join a company that also has a 401k, then roll it over into the new fund.

If you withdraw it now you'll lose some of what you gained.

In some rare cases once you leave a company you may be forced to roll it over, they will notify you if that's the case.

At this point, though, you should go to your 401k fund website and change your email if it's attached to your company email account so you can manage it once you leave.

 

[LittleKagsin]

Generally you should let it chill until you join a company that also has a 401k, then roll it over into the new fund.

If you withdraw it now you'll lose some of what you gained.

In some rare cases once you leave a company you may be forced to roll it over, they will notify you if that's the case.

At this point, though, you should go to your 401k fund website and change your email if it's attached to your company email account so you can manage it once you leave.

Perfect, thank youuu!

I don't want to withdraw it, obviously, that is not the goal. Hopefully it can just chill where it's at. And I'll be sure to change my email.

 

[Denbrought]

If I were you, I would check the following:

• The fees for your 401k account are (particularly any fees your employer is/was covering, which could become your responsibility once you move on). These are usually monthly/quarterly/annual, and either a % of your account's balance, a flat fee, a % of any gains, or a combination of the above.
• The available funds, and their expense ratios, as well as the funds you're actually invested in and their ratios.

Following that, I would compare that to the fees and funds available at my fave providers (Vanguard and Fidelity). Compared to the average 401k (I don't know your particular plan). You would have lower fees (usually zero), more funds available, and cheaper funds. At that point you can initiate a rollover (entails a little bit of paperwork, like signing+mailing a doc), wait a bit, and then have a shiny new account.

Your allocation can remain the same, as most funds can be replicated elsewhere (e.g. if you have an auto-pilot retirement fund, Vanguard has the Target Retirement 20XX funds, and Fidelity has the Freedom 20XX funds. If you have an S&P tracking index, both have ETFs and funds that do the same, so on).

Any future 401k you acquire can be rolled over into that same account, consolidating your investments (making sure they don't get forgotten).

 

[Mathias]

I believe you can also roll it into an Roth IRA with no fees or penalties.

 

[Denbrought]

I believe you can also roll it into an Roth IRA with no fees or penalties.

Except for having to pay taxes on the conversion, as it's essentially counted as income for that year. Refer to Vanguard's FAQ about it.

 

[Gared]

Except for having to pay taxes on the conversion, as it's essentially counted as income for that year. Refer to Vanguard's FAQ about it.

My parents got completely hosed on their taxes one year because of this very thing - they rolled a 10+ year old, fully vested, state employee 401(k) account into an IRA and it sucked hard. Their financial advisor at the time was a close personal friend, and was a much better friend than advisor, who failed to mention the tax angle, and it really strained their friendship for a few years - let's just say that it was a good thing that the roll-over happened due to an out-of-state relocation.

 

[Denbrought]

My parents got completely hosed on their taxes one year because of this very thing - they rolled a 10+ year old, fully vested, state employee 401(k) account into an IRA and it sucked hard. Their financial advisor at the time was a close personal friend, and was a much better friend than advisor, who failed to mention the tax angle, and it really strained their friendship for a few years - let's just say that it was a good thing that the roll-over happened due to an out-of-state relocation.

Assuming you're talking about a 401(k) to Roth IRA conversion, that is very sucky. Too late to help now, but you usually have until October of the next year to undo a conversion if it becomes disadvantageous come tax time (I've done a Roth to Trad recharacterization myself, as a few years ago my AGI ended up just above where I wanted it for the F-8880 tax credit). Refer to the relevant Vanguard article about the subject.

 

[Gared]

Yep, it went to a Roth IRA. It happened 13+ years ago, so it's way too late to do anything about it now, but yeah, I think the hit completely ate the refund they were expecting to get from the sale of one house and purchase of another, plus a 2000+ mile relocation for a job, and a bunch of other stuff; and they wound up paying a not insignificant bill instead.