Getting laid off or resigning on your own, you also leave behind your 401(k) plans.
What Happens to 401(k) Plans Left by Previous Employees?
Many workers quit their jobs at a concerning rate. Also, some companies start laying off their employees. There is a good chance that some departing workers leave behind an employer-sponsored retirement plan. Not all companies offer the same retirement plans, but those who do might want to look into what happens to their accounts when leaving a job.
Three Basic Choices for An Old 401(k)
There are several options for old 401(k)s. You can leave it as is, roll it into a new workplace plan or individual retirement plan, or cash it out. Most experts caution against the third option. Cashing out your plans would be the least desirable option. You could still opt to do this, but you must pay taxes on the distribution. You’ll have to pay a 10% tax penalty if you are younger than 59.5.
Keeping Track of the Old 401(k)
According to a post by CNBC, the easiest thing to do is to leave your retirement savings in your former employer’s plan once permitted. With this, you can’t anymore contribute to the plan or will be able to take a loan from it. It may seem to be the easiest move but it can lead to more work in the future. It can be hard to find old 401(k) accounts once you lose track of them.
Roll it Into a New Workplace Plan or Individual Retirement Plan
Transferring the balance to another qualified retirement plan such as the 401(k) in the new work you have or to your IRA. This would make it easier to track as your account would be more accessible to you.