Switching Jobs and 401K Accounts
I started my first day at my new job last February with a 20% pay increase to compensate for my upcoming wedding. I was was ecstatic to work on a new account for a new company but realized that I would have to roll over my 401K to my newest company. Essentially, the idea is to have your retirement savings follow you from job to job until youâre ready to stop working. This way, you can avoid dealing with multiple accounts as you settle into retirement.
In my circumstance, I dealt with whatâs called a âdirect rolloverâ or a rollover from one 401K to another without ever making it into the hands of the owner. There are different ways to manage a 401K and hereâs what Fidelity has to say:
Keep Your 401K Untouched
Hereâs a simple option. Donât touch it! Thereâs absolutely no penalty for an untouched 401K. What I donât like about this option is the fact that you could end up with multiple 401Ks to manage in your old age!
Rollover to an IRA
This is like moving from the employer to the financial institution. Rolling over to an IRA is a great option and you should consider it depending on your new employment situation.
Rollover to your new employer
My favorite option for ease. As mentioned above, I donât want to be 60-years-old and thinking about a job I had for 6 months and its associated 401K account.
Cash Out
Biggest absolute NO. PLEASE DO NOT. You will incur magnanimous taxes if you' donât qualify for retirement withdrawals. Cash-out only for a life or death situation. I mean it!
My Direct Rollover Situation
With our options established, I looked to roll over my funds to my new employer. After a call with Fidelity, I was told that my new employer would have to provide a physical signature. A physical signature in 2022?! This was set up by my previous employer.
After receiving a form in the mail, I created a PDF and emailed to my new employer for signature. I mailed out the signed form back to Fidelity and received notification that my rollover had been completed after a week.
Hereâs what I wasnât told. All contributions from my previous employer were nullified because I didnât meet the 5-year timeframe with the company. Although the previous employer didnât contribute much, thatâs still money on the table.
I sleep easier knowing my retirement money is in one account.
Have a great week,
JT