What to Do with Your 401k After You Leave a Job
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Leave It Where It Is
401k plans differ based on the employer, but most will give you the option to leave your 401k where it is even when you don't work for them anymore.
Depending on the 401k's money options, your money might be better off in the investments at your old job than moving it elsewhere. If you are happy with the investment options in the existing 401k, but not necessarily with your other options, it may be best to stay put. I personally did this with an ex-employer's 401k, because I was happy with the expense ratios and investments they offered.
Larger employers tend to offer 401k programs at lower fees. Compare any fees from your previous employer's 401k plan to whichever vehicles you are considering transferring to first. To do so, check the expense ratios of the mutual funds offered in both plans.
Depending on how much money is in your 401k at the time you leave, it may not be a good idea to leave it and do nothing. Often, accounts with balances of $5,000 or less may be closed automatically. If this happens, the employer may end up sending you a lump sum check, or deposit the money into an IRA in your name. It's best to check with your employer first.
Know that you won't be able to make more contributions to the existing 401k once your employment ends. Withdrawal options are also limited. 401k benefits, such as retirement loans, are usually not allowed once you are no longer actively participating in the plan.
Roll It into a 401k with Your New Employer
Simplicity is the key to easy 401k management. The standard routine for 401ks when you switch jobs is to roll it into your new employer's retirement plan.
Having just one 401k to manage can be beneficial if you don't continuously dedicate time to review all your accounts. However, as we mentioned before, you should closely compare expenses and investment options before making that decision.
Roll It into an Individual Retirement Account (IRA)
You also have the option to roll over the funds from your 401k into an IRA account with a bank or brokerage firm, where your money will continue to grow tax-deferred.
One possible benefit of an IRA rollover is the plethora of investment options available to you. Many 401ks are limited to just a handful of mutual funds and bonds, whereas IRAs give you more choices.
Likewise, many 401ks limit the number of times in a year you can make investment changes (known as portfolio rebalancing). With IRA accounts, you're not limited to a select amount of times you can make such changes, giving you more freedom and flexibility with an IRA.
Many brokerages and banks are known for giving out incentives to new customers — and there's no shortage of handouts when it comes to opening a new IRA with them. You may be able to snag yourself a bonus while gaining more control over your retirement money.
As promising as IRA rollovers can be, it's not always going to be the best option for 401k funds. For example, let's say you've left a job for another and you're debating moving your previous 401k into an IRA or your new employer's plan. Always take into consideration employer matching contributions. Most employer's 401k programs will contribute a certain percentage or match what you put into the account. For example, let's say the program will match up to 6% of your contributions, and you contribute 6% of your salary that year which ends up being $3,000. With the employer matching contributions, you end up gaining another $3,000 for the year. If you choose the IRA, you could possibly miss out on a ton of money.
Take the Money
You always have the option to simply close out your 401k when you leave your job, but this is almost always a bad choice.
If you decide to take the cash when you aren't 59 ½ or older, then you will end up paying an excessive amount of taxes along with penalty fees that are usually around 10%.
Your Next Steps
Once you have decided which rollover option to take, your first step is to set up the new account. When the account is opened, the new provider will provide you with instructions to transfer the money. Usually, this means you are in charge of contacting the former employer's plan administration and letting them know you need to make a direct rollover.
Every time payday rolls around, I’m on top of the world. Jeff Bezos-level rich - even though I’m anything but. And then somehow the very next day, rent is due.
The cycle continues. The next payday, bills for my apartment. I find myself without a surplus of savings since I just moved and newly-furnished my apartment completely.
Even more terrifying is the looming presence of the holiday season. Halloween’s officially over and before we know it, hello Thanksgiving…and then there’s Hanukkah, Christmas, New Year’s. It’s insane.
I’ve been feeling very British lately. Not in a Union-Jack-obsessed, “Keep Calm and Carry-On” way. I went through that phase in 2012 with everyone else… no thank you. And it’s not even a surge of patriotism catalyzed by the Queen dying — I’m firmly team Diana and team Meghan.
Now that fall is officially here, the holidays will sweep in and I’ll have to contend with the fact that I won’t be spending them with my family in the UK. I went home to London earlier this year, so there’s not much left in my travel budget for another trip across the pond. A few domestic jaunts might be in my future, but the closest I’ll get to England this winter is watching Love Island and Love, Actually.
So in that spirit, I’ve been filling my days with content from my favorite Brits. I’m listening to all the old British rock bands I grew up listening to, patiently awaiting the new Arctic Monkeys album, and rewatching anything with Michaela Coel in it. I even shipped myself an order of British Baked Beans, so you know it’s dire.
I’ve also been watching British YouTubers like Grace Beverley — my favorite. Generally, I only go on YouTube to watch Vogue Beauty Secrets and AD Open Door videos. But I’m so glad I stumbled on Grace. Her content is a mix of London lifestyle (what lured me in), relatable entrepreneurship, and mindful productivity. I’m not a hustle-and-grind-girlboss, but as a creative person in a 9-to-5, I need all the help I can get to stay plugged in. So, the video “how to be really really really productive without getting overwhelmed” changed my approach to WFH.
Grace outlines her own productivity method: the to-do table. Instead of making a simple to-do list, she divides her tasks into a table that anyone can follow. As someone who’s survived with to-do lists for years, I recently implemented Grace’s method, and it’s revolutionized my workdays.
how to be really really really productive without getting overwhelmedwww.youtube.com
I follow her routine to a tee. Here’s how it works:
Essentially, she divides her daily responsibilities into four categories: quick ticks, tasks, projects, and non-negotiables.
- Quick Ticks: Actions that take less than 5-minutes
- Tasks: To-do’s that take up to 30-minutes. Probably don’t take too much brain energy.
- Projects: Long-term list items. These help guide your priorities, even if you’re not crossing them off in one day.
- Non-negotiables: Pick 3 things each day that you must get done. This is how you’ll truly measure success.
With everything written down and sorted, next address your schedule. Meetings, deadlines, and time blocks — whatever works best for you. Write it down. Then make a pact with yourself to stick to them.
This way of categorization provides a roadmap for prioritizing your day — making you far more productive. Have you ever spent the entire day on small tasks and then suddenly realized you hadn’t moved the needle on any task? Or do you spend way too much time on tasks that aren’t a priority? No more. With your non-negotiables laid out, you know what to laser-focus on and what to dedicate energy towards.
Also, it pays to know your working style. I’m not a morning person. Yet, I have to be up and at ‘em super early. So, first thing in the morning, I march through my Quick Ticks to warm me up. I set a time limit, so I can knock out some easy wins which is totally inspiring. Then I move on to bigger things without lingering on emails or admin. For others, it might be more helpful to tackle the big things with all that early-in-the-day brain power earlier.
Grace has great tips on avoiding overwhelm and burnout. My favorite is taking more intentional breaks rather than scrolling through social media. I call this scrolling “productive” because I’m “coming up with pitches.” Oh, the lies we tell ourselves. It’s more productive in the long run to giving my brain a break with non-screen related stimuli.
Grace’s solution? Set a timer to read a real, an actual book. I’ve never thought of this. It’s a genius way to check off some books on my TBR and kickstart my creativity. After reading a good book, I’m completely inspired to write. So having books near my desk helps me step away from the computer during my lunch break for an actual reset. (And yes, the current books I’m reading are by British authors: Assembly by Natasha Brown, and Love in Color: Mythical Tales from Around the World, Retold by Bolu Babalolu.)
In my pursuit of switching out my WFH set-up and getting my life together, I’ve engineered my workstation for success. With my new WFH essentials and Grace’s productivity technique, I’m revitalized for work — despite the fall blues and my melancholy about the pending holidays.
Here are the things getting me hyped for work and helping me crush my Grace Beverley-inspired to-do tables — no lists in sight:
Pack your bags — Southwest Airlines is having a major sale! Fares are as low as $59 one-way if you book by October 3rd.
This end-of-summer super sale is a game-changer for your travel plans through the end of the year. Summertime travel gets all the glory. But why not take advantage of your long weekends, holidays, and PTO this fall. You’ll be surprised at how much travel you can fit in. Keep the fall/winter season exciting with domestic trips that give you all the excitement without breaking the bank. All thanks to Southwest.
Here’s the breakdown:
Where can you go?
You’ll find discounted tickets to and from most airports. Sale fares apply to cross country travel, and even Hawaii, Mexico, and the Caribbean! Whether you’re visiting a new city or revisiting your last beach vacation, this sale has fares to make your travel dreams come true.
What do the fares cover?
Southwest Airlines has multiple fare tiers, each with various benefits. Wanna Get Away fares start at $59, while Wanna Get Away Plus fares start at $89. You can also find great deals on Anytime fares, which offer priority boarding and express lanes. Then there’s Business Select tickets for a luxe experience at an affordable price point.
Do you have to be a Southwest Rapid Rewards member?
You may think these sale fares are too good to be true. Is there a catch? Do you have to be a Southwest Rapid Rewards member to access them? You’re in luck — anyone can attain these fares for a limited time.
But, insider tip, you should consider signing up for Southwest Rapid Rewards. With a free sign up, you earn points and miles with each trip you take. And with this sale, each dollar you spend on these discounted tix can stretch super far until you eventually earn free travel. The only thing better than a sale is free stuff.
I’ve been browsing the Southwest Airlines site, checking out flights and dreaming.