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Every time I've left a company they have given information on what to do to rollover my 401k, so I guess I'm a little surprised at the post. IMO, the worst thing to do would be cash the 401k out, if you are not close to retirement. I've rolled 2 past 401k's into my current one with no problems. They were all with Fidelity, but that shouldn't really matter.
I've noticed a few commercials on the radio and TV lately targeted to people having 401(k)s left over from jobs they've left years ago, and they haven't done anything with them. I'm trying to understand why anyone would be in this situation.
When you leave a job, you don't know if that company is going to exist in the future, so I'd think you would quickly put your 401(k) funds into an IRA or your new 401(k) ASAP, right?
I know that in most jobs you can't participate in the 401(k) until you are there a year, so the longest an old 401(k) should be sitting there is one year, then you should be dumping it into your new plan. But people seem to have 401(k)s sitting around from jobs they've left years & years ago. I just don't get it. What is the benefit of doing this? I'm not a financial expert, and am hoping some of the "gurus" here can enlighten me.
Companies close down or get taken over all the time. If you decide like 8 or 10 years later that you want to get to your old 401(k) how do your know that HR department that helped you years ago will still be around to help you? I was fortunate that after one year at my current job, my old HR person was still at my old company and helped me with my rollover into my new 401(k).
I'm sure all these people aren't just being irresponsible; they must have some reason for letting the old 401(k)s sit there, right?
Please explain to this non-financial person.
First of all, the company doesn't have access to your 401(k) fund. They make payments into a trust and then it's out of their hands -- literally. The only way they have access to your 401(k) funds is if they didn't make the payments to the trust in the first place, which is flat-out criminal. But once they do make the payments into the trust, it doesn't matter what happens to the company -- what matters is what happens to the trust. Moving it from one trust to another doesn't make your 401(k) balance any more secure unless you have reason to believe the prior trust was being mismanaged.
Second, I have money left in a 401(k) fund from a previous employer because it has a much better selection of investment options. At my current employer, I have 3 options. At my previous employer, I have at least 10.
one of our human flaws is its not what we know that gets us in trouble, its what we know that aint so, that does:
most of you are looking at this from what you know and not from what you dont know as far as the internal workings in most states.
heres why you shouldnt leave it:
i lived through a former company who went under while my 401k was with that company and this was while i was still there..
heres the problem you run in to when a company goes out of business. . the 401k plan is basically closed down and frozen by the custodian until its allowed to distribute the money . the money has to be moved. you cant have a 401k with no company behind it. your free to take it and roll it over or pay the taxes and penaltys if any and spend it.
that creates a problem for everyone because of the married and divorced folks in the plan..
there is a period of a few months where paper work has to be signed by spouses and ex spouses who are entitled to money making them aware you will be moving the money or taking it..
since not every former employee in the company can be easily gotten a hold of it takes lots time to go through the process. notices in papers have to run ,investagors used to track down people and every last attempt has to be made to get answers and the affidavitt back.
it took 3-4 months of no access to our money to run the process.
you can not make portfolio changes either as everything is frozen.. the markets may be crashing around you and you can make no changes. you cant buy and you cant sell.
if your ready to retire at least if you work for the company you know what kind of shape its in most likely. you can make other plans for money to live on for a few months if you have to or you can retire a little early before thay lock the plan if the company fails or just closes...
when you are not with your old company you may not have a clue as to their financial health. .
so to avoid loosing the ability to change investments or to not be able to draw income with your old plan save yourself some grief and take it with you.
Last edited by mathjak107; 05-15-2011 at 06:55 AM..
one of our human flaws is its not what we know that gets us in trouble, its what we know that aint so, that does: <snip>
I'll have to remember this quote! Similar to, but not the same, as "A little bit of knowledge is a dangerous thing.
As an aside, I left my 403b and 457b funds with the State and left my tiny TSP with the Fed. When I left the State, I could withdraw the funds without penalty, if needed. Not as easy with the IRAs (yes, I know you can set up a 72T plan) Most of my money is in my IRAs. I like it this way, although I may move a portion of my IRAs to a different investment firm for additional protection.
I have a new co-worker who is trying her best to get a payout of her 401K from her previous employer so she can roll it over to our current 401K plan.
However, the fine folks at Fidelity are doing their best to put up as many obstacles as possible. They gave me a hard time 5 years ago when I rolled my 401K from a previous employer. I'm not surprised to see they're still up to the same hijinks.
you could be right.... old custodians are never happy to give up money.
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