How To Handle Multiple Old 401(K)S

Posted on: 22 March 2018

Planning for retirement is a process that you engage in throughout your adult working life. If you hold multiple jobs over your lifetime, there is a good chance that you are going to end up with multiple 401(k) for the different jobs that you hold. In order to keep a handle on your retirement, you need to make sure that you keep track of all the money you have invested towards your retirement.

Consolidate Your Retirement Accounts

As you move from one job to the next over the life of your career, you are going to accumulate different 401(k)s. There are so many 401(k) options on the market; it is rare for one job to use the same 401(k) company as your last job.

In order to keep track of your retirement savings, and in order to compound upon the growth of your retirement assets, you are going to want to keep all of your retirement assets together. The best way to keep your retirement assets together is to consolidate your retirement accounts into one central account.

Create an Individual Retirement Account (IRA)

You are going to want to create an individual retirement account, also known as an IRA, to consolidate all of your retirement accounts. An individual retirement account is not tied to a specific job; it is tied to you personally. That means that even if you change jobs, you can still access and work with your IRA.

Since you are going to be moving pre-taxed retirement money around, you want to make sure that you set up a traditional IRA. A traditional IRA is made out of pre-taxed contributions, whereas a Roth IRA is not taxed until you withdraw from your retirement account.

Establish a Direct Rollover

In order to move your 401(k)s from your various employers into your new IRA account, you are going to want to make sure that you do a direct rollover. A direct rollover is also known as a trustee-to-trustee transfer.

It is really important that you make sure that the 401(k) company knows that you are transferring the money directly into a retirement account, and not personally withdrawing the funds. When you personally withdraw the funds, part of the balance is withheld and you will fax income taxes and a penalty tax for withdrawing early money from your retirement system. A company that offers retirement planning services can help you sort out the finer points. 

Keep all of your retirement investments together in one account will help you consolidate your retirement income and build on the interest in your accounts. A retirement planning service can help you with this process.