Starting a New Job? Don’t Forget About Your 401(k)!
Starting a new job is an exciting milestone, filled with new opportunities and challenges. Amidst the hustle and bustle of settling into your new role, it’s easy to overlook an essential aspect of your financial future—your old 401(k). In our latest video, we sit down with Senior Financial Planner Alex Menassa from Szarka Financial to discuss why managing your 401(k) during a job transition is crucial and how to do it effectively.
Common Mistakes to Avoid
According to Alex, one of the most common mistakes people make when switching jobs is forgetting about their old 401(k) plan. With so much focus on new health benefits, tax withholdings, and other onboarding tasks, it’s easy for your old retirement plan to get lost in the shuffle. However, ignoring your 401(k) can lead to missed opportunities for growth and even financial penalties.
Why Cashing Out Is a Bad Idea
One tempting option is to cash out your old 401(k), viewing it as “found money.” But Alex warns against this. Cashing out not only subjects you to taxes and penalties if you’re under 59 and a half, but it also means losing the most valuable asset in wealth building—time. The longer your money stays invested, the more it can grow.
Better Options for Your 401(k)
So, what should you do with your old 401(k)? Alex outlines three primary options:
- Leave it with your old employer: Your 401(k) can remain invested, but it won’t be updated, and you might lose track of it over time.
- Roll it over to your new employer’s 401(k): This can simplify your retirement savings by consolidating them into one account, but it might limit your investment options.
- Transfer it to an IRA: This option gives you the most control over your investments and often provides more options than a 401(k).
Consult a Financial Planner
Rolling over your 401(k) into an IRA can be the best choice for many, but it’s essential to work with a financial planner to navigate the rules and make the most of your investments. Alex emphasizes that a financial planner can help you consolidate your assets, avoid probate, and ensure that your beneficiary designations are up-to-date.
For more personalized financial advice, contact Szarka Financial at 440-779-1430.
If you have any questions or need personalized financial advice, don’t hesitate to contact Szarka Financial.