An additional benefit is not being required to pay taxes when moving into an IRA since both 401(k) plans and IRAs are funded with pre-tax dollars, Bera said.
While this may be an ideal option for some, those who have little experience or interest in investing may find it overwhelming in keeping track and maintaining an IRA. However, Rose at Alliance Wealth Management still believes it could provide a learning opportunity that the other options don't necessarily offer.
"If you've never had to pick your own investments and you're opening an IRA, there's a learning curve," Rose said, adding that he prefers that option — even for those account holders who don't have a financial advisor to consult. While 401(k) plans are relatively easy to set up, usually with online or human resources help at work, when you opening your own IRA "you have more invested interest, learn a little bit more and put more time into it," he said.
Depending on the new job you're starting, you can also transfer funds from your old plan into a new 401(k) plan. Financial advisors suggest that getting a direct rollover could be ideal and to ask the human resources department at your new job for additional guidance and paper work for a seamless transition.
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However, Dorsainvil of Your Greatest Contribution stressed that employees should be sure ot check the "expense ratios" — or service fees — of new plans.
"I've seen some 401(k) expense ratios at 1 percent, which is really high," Dorsainvil said, adding that ideal expense ratios should be under 0.4 percent, to minimize the hit on the interest account holders should be earning. "When rolling over 401(k) plans, our best friend is compounding interest," she added. "If you can grow your nest egg with new contributions, this would be the best bet for you."
Some people are looking to just cash out the 401(k) plan. If you're under 59½, you'll have to pay additional taxes on the proceeds and a 10 percent early withdrawal penalty.
This option may be ideal for those trying to pay off short-term debt, but Bera of Gen Y Planning says it's an option most people should try to avoid since workers could be missing out on long-term benefits.
The check you're cut "ends up only being a portion of what you originally withdrew, along with the fact that the money didn't have time to grow," she said. "It's worth considering rollover options because it's helpful to look at how much that investment would be worth."