Old 401 (k) s look a bit like the old clothes in the back of your closet. You know that you have to do something about it, but there they are, usually out of sight and the mind.
And so it is with your old 401 (k). If deciding with an old (k) plan has been on your task list for a while, here are the most important steps you need to take to get it done.
Step 1: Check your account value.
If your balance in the 401 (K) plan of your former employer is more than $ 7,000, you can leave the money in the old plan or the assets in an IRA or the 401 of your new employer (K) roll.
But if your balance falls under that $ 7,000 threshold, part of the decision -making can be out of your hands.
Step 2: Determine whether they remain limits within 401 (K).
Assuming your balance is more than $ 7,000 is your next task to decide whether you want to roll the money in an IRA or keep it in a 401 (K).
I often recommend rolling over the assets of a former 401 (K) in a no-fee IRA with a TopNotch investment fund company or discount broker. But some people appreciate the extra creditors protection that can accompany 401 (K) assets versus IRA assets, while others can reveal 401 (K) -specific investment options.
Step 3: Rate the quality of your 401 (K) options.
If you think you are better off leting in your money in a 401 (K) instead of rolling it to an IRA, the next task is to conduct some research into your own 401 (K) options.
Even if you decide to stay with a 401 (K), you may have to decide whether you are better off to stay in the plan of your former employer or that of your new employer.
Step 4: Find the right IRA provider.
If a rollover to an IRA is the best choice, the next step is to identify the right brokerage company or investment fund company. Look for a company that offers a width of high-quality investment options without extra layers of reimbursements for IRA investors. Goal-date funds are an elegant, low-maintenance and under-utilized option.
Step 5: Decide whether you turn your traditional 401 (K) assets to Roth.
If you decide to roll Roth 401 (K) to an IRA or your current employer 401 (K), your new account is also Roth, which means that you do not owe a tax on qualified recording.
If you have traditional 401 (K) assets, a rollover is also a good time to consider whether this assets should be converted to a Roth account at the same time.
Step 6: Perform.
If you have decided to roll your assets to an IRA, fill in the paperwork or online form to open the IRA. You then request a direct rollover of your 401 (K) plan to the new IRA provider.
The process can be a bit more cumbersome if you roll to the 401 (K) of your current employer.
