When Should You Roll Over a 401(k)?
Since the average person holds eleven different jobs before they reach 40 years of age, the odds are good that most of you will have at least one 401(k) plan at a previous employer. You don’t have to roll that money over to your own plan, but you can. Here are the two main reasons to roll over your 401(k):
- Your investment options are limited in the old plan. Some plans only invest in company stock, or in a few basic fund types. If you want more options, rolling over the plan to a fund held at a brokerage firm (online or traditional) could give you a wider variety of choices.
- Your investment costs are relatively high. Every plan charges different fees, usually a percentage of the amount you have invested. The smaller your old employer typically the higher the fees, since administrative costs are spread over fewer people. Find out the total fees you are currently charged and see if rolling over your funds will save you money in the long run.
Remember: While rolling over your 401(k) plan can involve a lot of paperwork, there should be few to no costs involved. Don’t let a little paperwork deter you from making the best decision for your future.