What to Do With Your 401(k) Retirement Plan

The average U.S. employee has many jobs before he or she retires, and with each new job may come the opportunity to participate in a 401(k) retirement plan.

What should you do with the funds in these 401(k)s after you terminate employment? You may have up to four options:

  1. Take a distribution. If you take a distribution, you will have to pay income taxes generally on the amount of the distribution and may have to pay an early withdrawal penalty.
  2. Do nothing. In most cases, you can keep the 401(k)s with your previous employers. However, some companies may require you to take your money out of their plan in order to reduce their administrative costs.
  3. Roll the funds into your current employer’s plan, if one is offered. A potential benefit of rolling the funds into another 401(k) plan is that your employer may pay a percentage of the plan’s annual fees.
  4. Move the funds into an individual retirement account (IRA).

Transferring Your 401(k) Funds to an IRA

There are two main advantages to transferring your 401(k) funds into a single IRA:

First, you will have full control over how your money will be invested. With a self-directed IRA, you can choose from among thousands of investment products in which to invest your money. Your IRA can include individual stocks and bonds or less traditional products, such as exchange-traded funds and unit investment trusts. If the choices seem overwhelming, your financial professional can offer additional information to help you select the mix of investments you want.

Second, you will have fewer accounts to maintain, which simplifies managing the accounts and may even reduce annual fees. If you have money in multiple 401(k)s, consolidating could save you money each year by limiting fees to a single account.

The Retirement Plan Choice Is Yours

You will want to consider the fees charged by the 401(k)s sponsored by your current and past employers, as well as the level of control you want to have over your investments before deciding what to do with your funds held in 401(k) plans of former employers. Talk to your financial professional if you have questions about how to meet your specific retirement goals.

Interested in converting your 401(k) into an IRA? Check out our 401(k) to IRA Conversion Checklist to learn how to combine your retirement savings into an Individual Retirement Fund.


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This communication is provided for educational and general marketing purposes only and should not be construed as a recommendation or suggestion as to the advisability of acquiring, holding or disposing of a particular investment, nor should it be construed as a suggestion or indication that the particular investment or investment course of action described herein is appropriate for any specific retirement investor. In providing this communication, Regions is not undertaking to provide impartial investment advice or to give advice in a fiduciary capacity.

This information should not be relied on or interpreted as accounting, financial planning, legal or tax advice. Regions encourages you to consult a professional concerning your specific situation and visit irs.gov for current tax rules.