What should I do with my old 401k?

So, you have your own business – congratulations!

When I was starting my business, making sure that my personal finances were rock solid was one of the first things I set out to do. If I was worried about my personal finances, I would run the risk of making short-sighted business decisions that would hurt my business long-term. 

Being organized with your finances is a big part of being confident with your finances. If you have an old 401(k) or other retirement plans scattered around, you’re in good company. There are 24.3 million mismanaged 401(k) plans simply because people forgot they have them.

What are your options? What should you do?

Not all plans are created equal, so it’s important to weigh the pros and cons to find the best option for you.

Here are your three options for those old retirement plans.

Keep it where it is

If your plan balance is more than $5,000, most companies will let you keep your balance in the plan. You won’t be making additional contributions, but your balance will continue to grow based on the investments you have chosen. While keeping it in place is convenient, you may be exposing yourself to higher plan and/or investment fees while limiting yourself to inferior investment options.

So, you can leave it behind, but most people like to consolidate their retirement accounts to make them easier to manage – one online profile, one account, and one investment strategy.

Bring it with you – Rollover to 401(k) plan

If you offer a 401(k) plan through your company, you can roll the old plan balance(s) into your company’s plan.

When comparing your old and new plans you should see which plan offers the best investment options and understand the difference in plan and investment fees. At the end of the day, it comes down to which plan will give you the best opportunity to grow your balance.

Bring it with you – Rollover to IRA 

If you’re a solopreneur or do not offer a retirement plan to employees, consolidating accounts could mean rolling over the old plan balance(s) into your Traditional/Roth IRA, SEP IRA, or Solo 401(k) – whichever you’ve determined is best for you as a business owner.

In an IRA, you will have virtually unlimited investment options and far more control over your fees. When managed properly, having more options and control usually means better performance, which means more for your bottom line and achieving your goals that much faster. 

Make the best decision for YOU.

There is no one-size-fits-all answer to any financial question. There are factors to consider that are unique to each situation which means that the best choice will be different for everyone. Most business owners choose to work with a financial advisor because they want to be fully engaged in their business. If you’re looking for help, consider leaning on a fiduciary advisor to help you implement a plan that aligns with all of your financial goals.