If you just got laid off, your 401(k) may be at the bottom of your to-do list. Understanding which route offers more advantages for continued growth that will align with your next chapter in life is the first step.
If you are one of the millions who have lost their jobs during the COVD-19 pandemic, you left many things behind. Colleagues, memories and your 401(k); but should you leave it where it is?
While it’s OK to leave it in place, is that the best decision?
There are several things to consider. Here are a couple alternatives available to you:
Let it be
If you opt to leave your 401(k) where it is, your investments will stand and, hopefully, continue to grow.
You’re probably thinking, there are more pressing needs to focus on right now, like filing for unemployment and creating cash flow, however a 401(k) that sits without any analysis of the investment options in these uncertain times could possibly cost you your retirement security. You may need to take a distribution in order to get by.
Although existing IRS rules allow those age 55 and over who lose their job to take withdrawals penalty free, the new CARES Act offers relief for those of any age who are affected by Covid-19. It allows for penalty free withdrawals of up to $100,000 from their plans and IRAs this year.
Roll it over
If your other past employers offered 401(k)s, now may be the time to consolidate them into one IRA account, instead of having multiple 401(k) plans from different jobs. An IRA generally also gives you more investment options than a 401(k).
It’s important to work with a wealth advisor who understands your current needs and your plans for retirement. No one should be given a cookie cutter approach to solving for these times and your advisor should sit with you to offer specialized advise, not a one-size-fits-all approach.
When you use a wealth advisor, they can help you set up the right investments. Once you open a new IRA, you can request distribution paperwork from your previous employer. You’ll need the new IRA account number for these forms. Your old plan may directly send the check to the new provider. However, sometimes the check is sent directly to you. Be sure to deposit it into your new account within 60 days, because if not it will be considered a withdrawal — and you will be taxed and penalized.
When choosing a wealth advisor to partner with, make sure they have a reputable custodian to help protect your assets and provide you with a wide range of services to help serve you.
When you’re ready, we put your plan into action. We keep track of your progress with ongoing maintenance and rebalancing as needed to make sure you’re on course to meet your goals. We’ll partner with you to revise your plan when needed. We can analyze market conditions and make moves that are more defensive to help reduce volatility while also providing liquidity when future buying opportunities present themselves. We are here to help. Schedule your complimentary consultation with us today!