Money fundamentals · Growth
Your 401(k): capture the match and keep old plans from getting lost.
A workplace retirement plan is one of the easiest ways to save, because the money moves before it ever hits your checking account. Two things trip people up: not contributing enough to get the full employer match, and leaving old accounts scattered behind at former jobs.
Don’t leave the match behind
Many employers match part of what you contribute, up to a certain percentage of pay. That match is part of your compensation. If you’re not contributing enough to receive all of it, you’re effectively turning down a raise. Check your plan’s matching formula and any vesting schedule, which determines when the employer’s contributions become fully yours.
When you change jobs: your options
When you leave an employer, you generally have four choices for the old plan:
- Leave it in the former employer’s plan, if allowed.
- Move it into your new employer’s plan, if that plan accepts transfers.
- Roll it over into an IRA.
- Cash it out, which usually means taxes and possibly an early withdrawal penalty.
Each option has its own trade-offs in fees, investment choices, services and protections. Compare them carefully before deciding.
Tracking down forgotten accounts
Millions of retirement accounts are left behind when people change jobs. If you’ve lost track of an old plan, start by contacting former employers. The U.S. Department of Labor also offers a free online lookup tool to help people find old workplace retirement plans.
Why cashing out hurts
Cashing out can feel tempting during a job change, but taxes and possible penalties take a big bite, and the money loses years of potential growth. Keeping retirement money working for retirement is usually the stronger long-term move.
The short version
- Contribute at least enough to capture your full employer match.
- Check your plan’s vesting schedule.
- When you leave a job, you can leave, move, roll over or cash out an old plan.
- Compare fees, choices and protections before moving money.
- Cashing out usually costs taxes and long-term growth.
Common questions
Is rolling over always the best option?
No. Each option has trade-offs, including fees, investment choices and creditor protections. The right choice depends on your situation.
How do I find an old 401(k)?
Contact your former employer or its plan administrator, review old statements and check the Department of Labor’s online lookup tool.
Mike does not provide tax, legal or accounting advice. For guidance on your own situation, talk with a qualified tax professional or attorney.
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