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Job-Hoppers: Hang Onto That 401k!

Before You Roll Over, Mull Over These Tips

It's a hot job market. So hot that more and more people are switching jobs and wondering, "what do I do with my 401k money?"

You've tucked that money away for such a long time, you might even be tempted to treat yourself to a new car or a first-time home. But don't do that. That's your retirement savings.

If you're switching jobs and wondering what to do with your 401k, know that you have several options:

• Take it out and spend it.
• Roll it over into an IRA.
• Keep it with your current employer
• Transfer it to your new employer

As for what to do if you're switching jobs, many people will say, "roll it over into an IRA." But there are a few downsides. First, there's the time and paperwork to make the switch (although that should be a minor downside). More importantly, you may lose the professional management and lower fees that often come with a company-run 401k program. Finally, you may face sheer confusion as you try to figure out how to invest the 401k money in the new IRA. But if the program offered by your old employer isn't so great, perhaps because of the limited number of investment options available or the poor performance and/or high fees of those options, then rolling it over to an IRA may be smart.

If your old employer will allow it and you do like their 401k program, consider keeping your dollars parked there. By keeping it parked at the old job, you avoid taxes, time, and worry. Your final option is to move your 401k to your new company. Even if you're not allowed to participate in your new employer's 401k plan for a while, you may be allowed to roll your old 401k into their plan. And their plan might be better than that of your old employer's. This move enables you to avoid taxes. It also allows you to more easily monitor your 401k investments if you plan to participate in their 401k, as well.

If you feel you really need that money -- to start a business, for instance, or to pay for your child's college costs -- you might cash out some of it and roll the rest over into an IRA or other 401k.

Just remember to always to watch out for those taxes -- and don't let the temptation of a new car or home deter you from saving for retirement.

More 401k information: Should I Invest More Than $10,000 In My 401k?

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