Don’t forget your old 401(k) when you quit a job or get fired

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Whether you choose to quit your job or not, don’t forget your 401(k) plan.

As workers continue to quit their jobs at an increased rate and some companies are making layoffs — including Amazon, Salesforce, and Goldman Sachs — there’s a good chance some departing workers will leave an employer-funded retirement plan in their wake.

While not everyone has a 401(k) or similar company pension plan, those who do may want to know what happens to their account when they quit a job, and what options exist — and which don’t.

You have three basic options for an old 401(k)

Broadly speaking, you have several options for your old 401(k). Maybe you can Leave it where it is, roll it into your new workplace plan or an individual retirement account, or cash it out — although experts generally caution against the third step.

Cashing out “is the least desirable option,” said Eric Amzalag, a board-certified financial planner and owner of Peak Financial Planning in Canoga Park, California.

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For starters, he said, you’d have to pay tax on the distribution — unless it’s post-tax money that you put into a Roth 401(k). With some exceptions, you also usually pay a 10% tax penalty if you are under the age of 59½. At that point, withdrawals from 401(k)s and other retirement accounts can begin.

“If the account size is large, this could put the person in a high tax bracket, which would result in the funds being taxed at a higher and disadvantageous rate,” Amzalag said.

Track the money left on a former employer’s 401(k).

Consider switching to a new workplace plan or IRA

Beware of 401(k) “Exit Costs”

There may be reasons to avoid an IRA rollover

https://www.cnbc.com/2023/01/17/dont-forget-about-your-old-401k-if-you-quit-a-job-or-are-laid-off.html Don’t forget your old 401(k) when you quit a job or get fired

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