When a friend of mine changed jobs recently, she discovered she had half a dozen old 401(k)s trailing her from her past jobs. She wanted to get on top of her financial planning, but wasn’t sure what to do with all those old investments. she asked me for advice.<\/p>\n
Truth is, I wasn’t sure either. I cashed out my one 401(k) to buy a house several years ago. I know that was a dumb move in the larger financial story of my life. Saving early for retirement<\/a> is one of the best ways to build wealth. I can’t undo it now, though, and I’ve been so focused on paying off debts I haven’t thought much about retirement planning for years.<\/p>\n As my debt burden shrinks<\/a>, it’s time to start thinking about my own investment strategy. So I looked into my friend’s question: What should she do with those old 401Ks?<\/p>\n According to Schwab, there are four basic things you can do<\/a> with a 401(k) when you leave a job. These are:<\/p>\n One more option: You may be able to roll your 401(k) over into a Roth IRA<\/a>, as Jeff Rose<\/a> explains at Good Financial Cents<\/a>. A Roth IRA<\/a> lets you deposit post-tax dollars and then withdraw money tax-free after retirement. In general, you’ll pay less tax on your retirement funds by funding a Roth IRA than a traditional IRA or 401(k). Making the switch to a Roth IRA from a 401(k) can be a little tricky, and the amount of funds you can do this with is limited. You may want to consult a financial professional if you’re planning to take this option.<\/p>\n After looking at all the options, I advised my friend to consolidate her old 401(k)s into one 401(k) account with her new employer, and to keep contributing to her Roth IRA as well as her 401(k). She can put up to $5,000 a year into her Roth IRA, and her remaining retirement funds into her 401(k). That’s not expert advice \u2014 it’s just what makes sense to me after looking into the options. Depending on your individual situation and your employer’s 401(k) offerings, you may find a different approach works best for you.<\/p>\n When I start up my retirement savings again (hopefully this year!), I’ll be following a similar tactic: setting up a Roth IRA and investing in that account first. Anything above the annual deposit limits that we can save will go into my husband’s 401(k).<\/p>\n Since I’m just starting out at this, I’m even more interested than usual in your experiences. What have you done with old retirement accounts when you’ve changed jobs? What types of accounts do you rely on for your retirement savings?<\/b><\/p>\n","protected":false},"excerpt":{"rendered":" When a friend of mine changed jobs recently, she discovered she had half a dozen old 401(k)s trailing her from her past jobs. She wanted to get on top of her financial planning, but wasn’t sure what to do with all those old investments. she asked me for advice.<\/p>\n Truth is, I wasn’t sure either. I cashed out my one 401(k) to buy a house several years ago. I know that was a dumb move in the larger financial story of my life. Saving early for retirement<\/a> is one of the best ways to build wealth. I can’t undo it now, though, and I’ve been so focused on paying off debts I haven’t thought much about retirement planning for years.<\/p>\nWhat to Do With Old 401(k)s<\/h2>\n
\n
Putting Theory Into Practice<\/h2>\n