A recent survey by Bankrate revealed that over half of working Americans are considering changing jobs sometime in the next year. If you fall into that category don’t forget about your 401(k). Double check the rules of how it works with your employer and what options you have available for that money.
Changing jobs can be stressful enough. Even though it usually means a positive change in terms of job satisfaction and income, it can mean big changes at home regarding family time, who picks up the kids and takes them to soccer practice, and making it to other events with friends and family. The last thing most folks want to think of is their old 401(k). But taking a few minutes to focus on it can mean avoiding a huge mistake with your money that happens all too often.
Often times the administrator of your old 401(k) plan will allow you to leave the money where it is. That sounds easy enough, but this can be a big problem for you down the road. It’s easy to not open your quarterly or annual statements to see how your investment is performing. Here’s the biggest risk, and something I’ve seen happen with many investors. The company they used to work for no longer exists. After a while, that 401(k) may move to another investment company to hold. And then another one. And another one. Kind of like an old credit card debt that wasn’t paid gets shifted around from one collector to another. By the time you get around to looking for your money it could take weeks or even months to locate who is holding your money. In some circumstances investors may never locate those funds. Wouldn’t you hate to leave $50,000 behind and not be able to find it ten or twenty years later? It happens more than you realize.
You do have some options when you leave your job. You may be able to roll those funds over into the 401(k) plan with your new employer. You’ll want to make sure that is possible, sometimes it isn’t. Each plan will have their own rules. Another option is to roll over those funds directly into a Traditional IRA. It will be much easier to keep track of your money and a Traditional IRA will allow you almost an unlimited number of choices to invest in, unlike most 401(k) plans. Moving those funds into a Traditional IRA can also allow you to be much more diversified with your long term investment strategy.
If you plan on leaving your job, or already have, contact your investment advisor to discuss this important change in your life and make sure you stay on track with your investment plans. Leaving your money behind is never the best option.