What Do You Do With an Old 401 K Plan?

AskBobHeaderQuestion- Dear Bob,

I have worked at several companies through the years and participated in 401 K plans with those companies.  My old 401 K plans are still at those companies.  I also have a few IRA’s.  Is it OK to leave everything where it is or should I be taking some actions?

Answer

When an employee leaves a company, it is standard procedure to clear out their desk and gather all of their personal belongings before leaving.  The same applies to your 401 K plan. There are a few downsides to leaving a 401 K plan at an old employer.  First, it can easily become out of sight out of mind.  I have talked to people who have completely forgotten about old 401 K plans. Second, most 401 K plans are limited in options.  By rolling that 401 K plan over to an IRA you open up limitless possibilities for investing.  Third, you have control and choice over fees and costs outside of the 401 K plan.

Finally, and most important, you have the opportunity to combine all of your accounts into one big strategy where the investments can be managed for risk and managed for growth.  In fact, you can hire someone to manage the money for you.

The best strategy for investment accounts in general is to have them completely under your control.

Now, when does it not make sense to roll over the 401 K plan?

There has to be some type of advantage for making the move.  Making a parallel move to a financial advisor who is going to charge commissions and fees and just put it in a buy and hold strategy is not much of an advantage.  You could probably leave it invested in the 401 K plan and accomplish the same thing without paying the commissions and fees.

With any financial decision always be able to understand the value that the move creates!

Bob Brooks is the host of the Prudent Money Radio Show and the president of Prudent Money Financial Services.  Through his firm, he invests and manages investments for his clientele.  To contact Bob, you can email Judy Parrish to set a time – Judy@prudentmoney.com

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