FINANCIAL FOCUS: What to do with a 401(k) after leaving a job

Published: Thursday, January 9, 2014 at 03:50 PM.

• Roll the money over to an IRA. You may find several advantages to rolling your 401(k) over to an Individual Retirement Account.

First, your money will still have the potential to grow on a tax-deferred basis.

Second, you can invest your funds in virtually any investment you choose — including stocks, bonds, government securities and certificates of deposit.

Third, if you own more than one 401(k) account, you could find it advantageous to consolidate them into one IRA, making it easier to allocate and monitor your retirement assets.

Fourth, IRAs may give you greater flexibility if you plan to pass money to your children. In fact, if your child inherits your IRA, he or she can stretch withdrawals over his or her entire lifetime, rather than taking the money as a lump sum. (If you do transfer funds from your old 401(k) to an IRA, use a “direct rollover” to avoid the possibility of triggering unwanted taxes.)                                                                   

Before making any moves with your 401(k), consult with your tax and financial advisers. By looking closely at your options, and by getting professional guidance, you can make the choice that’s right for you.

Joe Faulk is a financial adviser.



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