You may already know the basic best practices that apply to 401(k) plans: Save, take advantage of the employer match, and avoid cashing out too early.
But did you know your 401(k) offers other, lesser-known options that could make a real difference for your future? Let’s take a closer look at some moves you may not have thought about.
Rolling Over Isn’t Your Only Move
When you leave a job, you don’t have to automatically roll your 401(k) into an IRA, although that’s a smart choice for many. You can also:
- Move it to your new employer’s plan, which can help keep things more organized as well as give you access to better investment options.
- Leave it where it is, as long as your balance exceeds $7,000.1 Sometimes, this might feel like the simplest option if you like your old plan’s investments and aren’t ready to make changes.
- Take it with you as cash, which is not usually recommended, but it is still an option. Just remember, taxes and penalties can significantly reduce your balance if you’re under 59½.2
Stop Yourself from Moving Too Fast
If your company is acquired or merged, employees will be affected, as well as their 401(k) plans and other benefits. But don’t worry—you still have options. Looking into what’s available can help you preserve or even improve your plan’s value. For example, you might be able to:
- Join the new company’s plan and potentially benefit from new investment options or matches
- Keep your old plan in place, if that’s part of the merger agreement
- Roll your money into a tax-advantaged IRA if the plan is terminated as a result of the merger or acquisition
Move Faster In the Right Direction
Did you know that if you’re 50 or older, the IRS allows you to contribute extra money to your 401(k) plan each year? And if you’re between 60 and 63, a new “super catch-up” rule allows you to add even more—up to $10,000 extra or 150% of the standard catch-up, whichever is greater, starting in 2025.3
These provisions can offer a significant boost to your savings. Verify with your HR department to ensure your company’s plan permits this.
Move Over Old Accounts
If you’ve got 401(k)s scattered from past jobs, consider consolidating them. Not only can this make your life easier, but it might also help you potentially reduce fees.
Many employees also don’t realize they can take hardship withdrawals or loans from their 401(k) in a pinch. While it’s not always the best choice, this option can provide a helpful safety net in certain situations. Just be sure to understand the rules and pay yourself back—otherwise, you could face taxes and penalties.4
Your Next Move
Your 401(k) provides more flexibility than you might think. Still, plans can vary, and some standard rules apply across all of them. To learn more, request our free, easy-to-use guide that explains 401(k) plans in detail. And before making any big decisions, reach out to your Bridger Financial Group advisor to answer questions and help you weigh your options.
Sources:
1 https://www.bankrate.com/retirement/8-tips-on-moving-401k-after-leaving-job/
2 https://www.insuranceneighbor.com/if-my-company-is-acquired-by-another-company-what-happens-to-my-401k/
4 https://www.fidelity.com/viewpoints/financial-basics/taking-money-from-401k.