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Question:


I just changed jobs for the first time. Can I move my 401(k) balance from my old company into my new company 401(k) plan?
-Groovy


Answer:


Sure, assuming your new employer doesn’t mind – it’s not required – and assuming the balance in the account with your old employer is big enough. If you left your old job with a balance of less than $1,000, you’ll probably just be cashed out. If you want to avoid taxes and penalties, the simplest option is to roll the money into an individual retirement account. If you have between $1,000 and $5,000 in the old plan, your former employer probably will roll the money over into an IRA on your behalf, as it’s permitted to do.
If you’ve got more than $5,000 at stake, then most likely you’ve got a choice of keeping the money with your old company, rolling it over into the plan at your new job or putting it into an IRA. Employer plans typically incur lower costs than individual plans, so the last option probably isn’t best. An argument for transferring your money into the new employer plan is that it’s more efficient and less tedious to have retirement assets in one place and not scattered around. A more important consideration is which plan has the best investment choices. Take a Saturday afternoon, compare the range of funds on offer in both plans, along with the funds’ performance records, which you can find at websites like Morningstar.com, and leave the money where it is or move it depending on what you learn from your research.

-Conrad de Aenlle



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