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Leave Your 401(k) With Your Former Employer

Transcript: Leave Your 401(k) With Your Former Employer

I took the leap. I left my corporate job and opened my own coffee shop and I couldn’t be happier. I can’t tell you how many decisions I had to make, but leaving my 401(k) with my old company was a no-brainer for me. I had a lot to do here and just didn’t want to spend the time worrying about what to do with my retirement savings. My investments were doing pretty well, so why move?

Leaving mine with my old company meant that my assets still had the opportunity to grow from now until when I retire. And, I have no taxes due until I decide to take money out of the plan.

By leaving your retirement savings with your former employer:

  • There’s no activity required on your part
  • Your assets retain their tax-advantaged growth potential
  • You can typically keep your current investments
  • And, the assets are usually protected from creditors’ claims

Staying put also meant I didn’t have to take the time to understand all the rules and paperwork about moving money and I didn’t want to risk getting hit with withdrawal penalties and taxes because I made a mistake on how I moved my money.

And I still have some control over my portfolio, though it’s not as easy as when I was an employee. I can’t make additional contributions to it, but I think of it as my retirement plan that I just let "percolate" for a long time.

Things to keep in mind are:

  • Additional contributions are typically not allowed
  • Your distribution and investment options may be limited
  • You’ll have to maintain a relationship with your former employer
  • And, the plan may not let you leave your assets there

Of course, I don’t know what you have brewing, but it’s important that you evaluate all of your options. I did what a lot of those folks like me did and talked to Wells Fargo. They educated me about my 401(k) distribution choices and then I decided what was best for me. Someday, I may want to consolidate my retirement accounts into one place, but, for now, this is the best option for me.