You might be working under various employers from time to time. But what about the 410(k) retirement plan that you’ve with your employers? Lot of people are confused as to whether or not they should leave the account as it is or roll it over into an IRA account.  Let’s check out which is the best option to go for:

Leave 401(K) with your ex-employers:
It is better not to keep your retirement savings with your ex-employers. One of the main reasons for it is that after 2-3 job switches, you will find your money is spread across various 401k plans and that too at different places. This may make it difficult for you to plan your investment strategy for retirement. However, there can be some cases wherein it would be a better option to leave your 401(K) with your ex-employer. Check out the reasons:

• Move to another job within short time period: If you feel that you would be able to get a job within a short period of time, then it’s better to leave the 401k with your ex-employer. You can get a new job and then transfer the old retirement plan into your new employer’s plan provided he allows the rollover money.

• Closer to retirement age: If you’re closer to your retirement age, it’s better to leave your money with your ex-employer. If you are under 59 and ½ years of age and transfer balance into IRA and then withdraw money from IRA to meet your expenses, you will have to pay income tax. Also, you would be responsible for paying 10% penalty.

If you are withdrawing money from your company’s 401(k) account, you won’t be responsible for the 10% penalty provided you’re 55 years or more of age. However, you’ll still be responsible for paying income tax on taxable amount that you withdraw.
(more…)