Abandoned 401(k)? How to Manage Your Old Retirement Account

Changing jobs is exciting, but it can leave you wondering what to do with your old 401(k). Many professionals leave their retirement accounts behind, sometimes referring to them as “abandoned 401(k)s.” Ignoring these accounts could limit your long-term growth and complicate your retirement planning.

Here’s a guide to help you make an informed decision.

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Options for Your Old 401(k)

1. Leave It With Your Previous Employer

You may be able to leave your 401(k) where it is if your balance meets the plan’s minimum.

Pros:

• Tax-deferred growth continues

• No immediate taxes

Cons:

• Limited investment options

• Must monitor plan fees and rules

2. Roll It Over to Your New Employer’s Plan

Rolling your 401(k) into your new employer’s plan consolidates your accounts and simplifies management.

Pros:

• Easier to track your investments

• Continued tax-deferred growth

Cons:

• Eligibility depends on the new plan

• Investment options may be more limited than an IRA

3. Roll It Over to an IRA

Rolling your old 401(k) into an IRA gives you more control and investment choices.

Pros:

• Wider range of investments

• Greater flexibility in account management

Cons:

• Must follow rollover procedures to avoid taxes or penalties

• Fees may differ from 401(k) plans

4. Cash Out (Use Caution)

Cashing out is an option, but usually not recommended due to taxes and penalties.

Pros:

• Immediate access to funds

Cons:

• Taxes and early withdrawal penalties

• Reduces long-term retirement growth

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Key Takeaways

• Leaving a 401(k) with a former employer can work if fees and investment options are acceptable.

• Rolling over to your new employer’s plan or an IRA consolidates accounts and can simplify retirement planning.

• Cashing out should be a last resort due to tax consequences.

• Reviewing your old 401(k) is essential for keeping your retirement strategy on track.

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Frequently Asked Questions

Q: How do I know if I can roll my 401(k) into my new employer’s plan?

A: Contact your new plan administrator to confirm eligibility and learn about investment options.

Q: What is the difference between a rollover to an IRA and a new employer plan?

A: An IRA often provides more investment flexibility, while a new employer plan keeps your accounts consolidated.  Also, it can make a difference in terms of when you need to begin required minimum distributions.

Q: Are there fees I should watch for?

A: Yes, check both your old plan and any new accounts for administrative or investment fees that could affect growth.

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Take the Next Step

At Peters Financial, we guide professionals through retirement planning, 401(k) rollovers, and investment strategies tailored to your goals.

Book a consultation today to review your abandoned 401(k) and explore the best options for your retirement.

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About the Author:

David Peters, CPA, CFP, ChFC, CLU, CPCU, CGMA, is the Founder and Owner of Peters Professional Education (petersprofessionaleducation.com) and Peters Tax Preparation & Consulting, PC. David Peters is also registered with the U.S. Securities and Exchange Commission (SEC) as an Investment Advisor Representative (IAR) with Peters Financial LLC. He regularly teaches courses in accounting, finance, insurance, financial planning, and ethics throughout the United States, and regularly contributes regularly to various professional publications, including NCACPA’s Interim Report, SCACPA’s CPA Report, and VSCPA’s Disclosures.

Required Disclosure:

The content presented above is for informational purposes only, is general in nature, and is not intended to and should not be relied upon or construed as a financial plan or financial/investment advice regarding any specific issue or factual circumstance.

Financial and investment advisory services offered through Peters Financial LLC. Brokerage and custodial services offered through Charles Schwab Co. Inc., member FINRA and SIPC. Peters Financial LLC and Charles Schwab Co. Inc. are not affiliated. David Peters also offers tax services through Peters Tax Preparation & Consulting, PC. Clients or prospective clients are never obligated to use Peters Tax Preparation & Consulting, PC. as part of any financial planning or investment management services offered by Peters Financial LLC.