You've packed up and moved on from your job. One thing you've left behind is your 401(k).
While you can leave your account in place and let it continue to grow until retirement, is that the best decision?
"Sometimes there isn't a really clear option," said certified financial planner Sophia Bera, founder and CEO of Austin, Texas-based Gen Y Planning.
"That's why this is challenging."
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There are a number of things to take into account, like whether you are one of the 22 million who have lost their jobs during the coronavirus pandemic or if you are starting a new job with a new 401(k) plan.
Also, consider the fees involved in both your previous employer's 401(k) and a new account you may want to roll it into, as well as the investment options you are looking for.
Here are the available alternatives.
If you opt to leave your 401(k) where it is, your contributions will cease — as will any match your employer made — but your investments will stand and, hopefully, continue to grow. Many employers require at least a $5,000 balance to do this.
If you've lost your job, Bera suggests taking this route — at least, at first — because she thinks there are bigger things to focus on right now.
Make sure you are applying for unemployment benefits, pay off any high-interest-rate debt if you can and look for a new job, she said.
"Focus on more immediate cash flow needs and let your 401(k) plan sit for now," advises Bera, a member of the CNBC Financial Advisor Council.
"You might have more options a few months from now."
You may have a new job with a new 401(k), or you may need to take a distribution in order to get by.
While the IRS allows those age 55 and over who lose their job to take withdrawals penalty free, there is new relief for those of any age who are affected by Covid-19. The $2 trillion federal CARES Act permits penalty free withdrawals of up to $100,000 from their 401(k) plans and individual retirement accounts, as well as a 401(k) loan up to $100,000, in 2020.
If you start a new job and the employer offers a 401(k), look at the investment options and the fees in the new plan. Some fees are really low in 401(k) plans, so you may want to roll your old 401(k) into your new one.
Having everything in one account, instead of having multiple 401(k) plans from different jobs, helps keep your retirement savings streamlined, Berra said.
To start the process, speak to your new human resources department to make sure your new plan accepts rollovers. Then, you'll have to fill out paperwork form your new plan, as well as a transfer form from your old employer.
If the 401(k) fees in your new plan are high, then consider rolling your old plan into an IRA. This also helps keep your retirement savings streamlined — you can consolidate all of your old 401(k) balances into one IRA.
An IRA generally also gives you more investment options than a 401(k).
"You can choose a bunch of index funds or lower-cost funds," Bera said.
Ivory Johnson, a CFP and founder of Washington, D.C.-based Delancy Wealth Management, always prefers an IRA over a new company's 401(k) because of those options — especially if you want to be proactive in your investing.
"When you have economic growth declining and no inflation — or deflation — there are certain sectors, like consumer staples, utilities that usually do well," he said.
"You may not be able to pinpoint that inside a 401(k)."
You can open an IRA through a discount brokerage firm. You may also prefer to use a financial professional to help you set up the right investments.
Just make sure you do your homework on a potential advisor. Check their board certifications, like the CFP Board for certified financial planners or through the online BrokerCheck tool from the Financial Industry Regulatory Authority, or FINRA.
"Interview several," Johnson said. He also recommends that in addition to their credentials, make sure that you like the person.
"You have to trust the person and you have to know that they are competent," he said.
Once you open a new IRA, you can request distribution paperwork from your previous employer. You'll need the new IRA account number for these forms. Your old plan may directly send the check to the new provider. However, sometimes the check is sent directly to you, with the name of the brokerage firm and then FBO (for the benefit of) your name.
Be sure to deposit it into your new account within 60 days, because if not it will be considered a withdrawal — and you will be taxed and penalized, Berra warned.
If you lost your job and want to move your money out of your former employer's 401(k), this could be a great year for a Roth conversion, since your income has dropped, Berra advises.
You make the contributions after tax, as opposed to pre-tax as with a traditional IRA or 401(k). That means the money grows tax-free and you aren't hit with taxes when you make a withdrawal.
"The market is down, so it might be a good time to put that money in now to have that growth on that money," Berra said.
If you leave your job and have a low balance, it may also be a good idea, added Johnson.
Just make sure you have enough money to pay taxes on the money you've converted into a Roth come tax time.
The higher the balance you transfer, the higher the taxes.
In the end, when investing for the future, consider an overall plan that splits your money between a pre-tax 401(k), a Roth IRA and some investments in a brokerage account, which are taxed as long-term capital gains when you sell, said Berra.
"I'm a fan of having a little bit of money in different taxable buckets," she said.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.