Monday, November 05, 2007 12:39 PM
Should we rollover old 401(k)s?
When you leave a job, wouldn't leave your extra pair of shoes and your work sweater behind. And you shouldn’t leave your money either. If you have more than $5,000 is your 401(k) plan, you are legally allowed leave it where it is until you retire, although you can't add more funds to it. If you have between $1,000 and $5,000, your company now has to roll it over into a private IRA, and if you have less than $1,000 they cash you out and you have to pay tax on the amount.
But just like you wouldn't leave behind your personal stuff, why would you leave behind your retirement fund? Rolling over old 401(k)s to a new fund is not difficult. All you have to do is open an IRA account at a financial institution -- your local bank will do just fine -- and fill out a form to send to your old company's plan administrator. He or she will cut you a check, and as long as you deposit it into the IRA within 60 days, you won't have to pay taxes on it as a withdrawal. You can then control the breakdown of your investments and consolidate your efforts by only having to make your choices once.
Every time you leave a job, you can roll over your 401(k) into this same account, so you only have to go through this process once. Just note that these are individual retirement accounts. That means one for you and one for your spouse. This is one case where you can't merge your finances completely.