When leaving one job for another do you leave your personal pictures and belongings behind? Of course not, but many people do leave their 401(k) account with their previous employer. At the very least this can mean the account is getting no attention, at the worst it means the account is not part of a holistic financial and retirement strategy. “Left behind” 401(k)s are subject to the same changes in fit, fees, and quality as other accounts, the difference is no one is paying attention. Converting a 401(k) into an Individual Retirement Account or consolidating with another retirement account is a fairly easy process and worth discussing with your financial professional.
When speaking with your financial professional you may want to consider the following:
- Increasing your investment options: 401(k) accounts have very limited investment options. Individual retirement accounts are open to almost unlimited investment options.
- Lowering fees and costs: 401(k) accounts typically carry three (and sometimes more) fee types. Converting accounts can potentially reduce fees and other costs that are not always transparent. Consolidating accounts also leads to increased investment amounts which typically lowers costs.
- Various account options: It may be best to roll your old 401(k) into an IRA, a Roth IRA, or consolidate it with your current employer’s 401(k). Costs, options, and fit with your current plan should all be considered.
Talk with your financial professional to create the best options for your current and any “left behind” 401(k) accounts.