If you had $10,000 in your 401(k) and you decided to cash it out at age 30, how much would you have left after taxes and penalties?

A. $9,000
B. $2,500
C. $6,300
D. $10,000

Stick around, and we’ll get you the answer.

If you're early in your career, the average time that you spend in a  job is  just around 3 years, so, if you started your career at 24, there's a good chance you might have 5 different jobs by the age of 40.

So, you might ask yourself,  What does that mean for my future savings or retirement?

How can you manage to get any kind of  savings together if you're at a new job every few years? One of the great ways is to contribute to the 401(k) plan offered by your employer—especially if  they’ll match your contribution.  Even small contributions can add up pretty quickly.

I know what you’re thinking, though, How is that going to add up if I keep switching jobs?  That’s a good question. With all the job changes, it’s tempting to cash out your 401(k) and use that money for something you want or need now – instead of 20 or 30 years down the road.

However, if you do that every time you change jobs, you will make it harder to build your retirement nest egg. Whether  you’ve saved a little or a lot, every dollar helps build towards your retirement future.

If you change jobs once or even ten times, consider all the options that you have available for that money:  leaving it in your former 401(k), rolling it to your new 401(k) at your new employer, rolling it into an IRA or cashing it out. You have the control of your money and by leaving it in a retirement plan, you can continue to build towards your retirement future.

There are a few simple steps you can take to have money so you can retire one day.  First, build some savings that you can use to pay bills and cover unexpected expenses.  If you have savings, you won’t need to raid your retirement account. 

This will allow the money you’ve saved to keep growing tax-deferred over time, and allow you to have the kind of retirement we all dream about.

There are a few simple steps you can do to have money so you can retire one day.  First, build some savings that you can use to pay bills and cover unexpected expenses.  If you have savings, you won’t need to raid your retirement account. 

Then, roll over your 401(k) to an IRA when changing jobs instead of cashing it out.  This will allow the money you’ve saved to keep growing tax-deferred over time, and allow you to have the kind of retirement we all dream about.

So, if you had $10,000 in your 401(k) and you decided to cash it out at age 30, how much would you have left? The answer is C, $6,300 – the other $3,700 would have been paid out in taxes and penalties.  So keeping the money in your 401(k) is a really good idea, unless you absolutely need it.

I’m your host for My Financial Minute —check back often to continue the conversation.

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