Breathe New Life into Your Old 401(k)

  by Jesse Anderson

5 Steps to Breathe New Life into Your Old 401(k)

Leaving a job is stressful and emotional. Still, it’s critically important for you to remember to claim all your benefits and assets before you say goodbye.

Most people don’t realize the choices they have with their ‘old 401(k)’ because it’s with a previous employer. But the truth of the matter is that this is your money, so you shouldn’t leave it behind or neglect it.

Instead, breathe new life into your old 401(k) with the following 5 simple steps:


Execute an IRA Rollover

 While working for a company, a 401(k) can be a terrific investment vehicle. Many companies will offer an employer match, which can be a significant benefit for your overall financial plan. However, when you leave the employer, you lose that benefit. The old 401(k) becomes an investment vehicle in which you have limited control, and limited investment options.

The first step to improving your old 401(k) is to rollover the old plan into an IRA. When you rollover the assets, your money can still grow tax deferred. With an IRA, you have significantly more investment options available to you.


Choose Better Investments

 When you rollover your assets into an IRA, you will have access to nearly an unlimited amount of investment options.  Most employers’ plans only have a small list of mutual funds to choose from. This is a great opportunity to create a custom portfolio that best suits your individual investment needs.


Review Investments (re-balance)

 It is recommended that investors review their portfolios once or twice per year to evaluate how much your assets have deviated from their original allocation. Many investors set up their original investment allocation and never look at it again.  By rebalancing, you are buying or selling assets in your portfolio to ensure your investments are in line with your original desired level of asset allocation.


Keep Saving

 You won’t be able to continue to contribute to the 401(k) if you no longer work for the firm.  However, you can make annual contributions to an IRA after you rollover the funds.  Making consistent contributions is one of the simplest ways to reach your retirement goal sooner.  It’s important to make your contributions automatic by contributing each pay period. Doing this is a great way to pay yourself first. Consistent saving is the best way to build long-term wealth.


Update Beneficiary

 When rolling over your 401(k), it will be important to update your beneficiary and understand the rules that apply. This is one of the most important steps you can take, and can save your loved ones both time and money in the unfortunate situation of your death.


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