Why Ignoring Your Old 401(k) Could Be a Big Mistake - What Can You Do About It | Learn

Planning for retirement is one of the most important financial decisions you'll make. With all the different options available, deciding what to do with your savings can be challenging.

Many choose to participate in a 401(k) plan through their employer, as it offers tax advantages and employer matching contributions. However, when you change jobs, the situation shifts, leaving you with an important decision: what should you do with your old 401(k)?

When You Leave Your Job, What Are Your Options?

When you leave your job, your 401(k) doesn’t just disappear. You’re left with several choices that will shape your retirement savings. Let’s explore your potential options:

Rollover to an IRA: Rolling over to an IRA is a popular option because it allows you to avoid penalties and taxable events while gaining more control and flexibility over your investments. Approximately 70-75% of funds leaving 401(k) plans are transferred to IRAs, reflecting a strong preference for the broader investment choices and continued tax advantages that IRAs offer. This option is especially popular among older individuals, with around 81% of those aged 60 and above choosing to rollover their 401(k) to an IRA when they retire or change jobs.

Leave It with Your Former Employer: As of May 2023, an astonishing 29.2 million 401(k) accounts in the United States have been forgotten or left behind, totaling approximately $1.65 trillion in assets. While it might seem convenient to leave your 401(k) with a former employer, there’s a chance it could be forgotten about. Additionally, while it’s left behind, this choice often leads to reduced control over your investments and the potential for accumulating fees.

Cash Out: It’s tempting to cash out your money, but this choice comes with drawbacks. Cashing out your 401(k) before retirement age could potentially result in an early withdrawal penalty and hefty taxes, greatly reducing the amount you have saved for your future.

Rollover to a New Employer’s 401(k): Rolling over to your new employer’s 401(k) consolidates your retirement funds, but it may come with similar limitations to your previous plan, such as restricted investment options and potential fees. Carefully reviewing the new plan is important to ensure it aligns with your retirement goals.

Why Do People Rollover Their Old 401(k) to an IRA?

Here are four key reasons why many people choose to make this move:

You’re in the Driver’s Seat: Unlike 401(k)s, which limit you to a pre-selected menu of investment options, IRAs provide a wider range of choices, allowing you to tailor your portfolio with assets like crypto, precious metals, and individual stocks. This flexibility helps align your investments with your specific retirement goals and risk tolerance.

Lower Fees: Many 401(k) plans come with administrative fees and hidden costs that can eat into your retirement savings over time. For instance, whenever your 401(k) administrator makes changes to your investments, you can bet they’re not doing it for free, there’s usually a fee involved every time. By rolling over your 401(k) into an IRA, you often have a chance to cut down on these fees and keep more of your money working for you.

24/7 365 Access: Some IRAs, like Crypto IRAs, have 24/7 365 access to the markets because they are not tied to the traditional financial markets with limited hours of operation. This constant accessibility allows you to respond to market changes in real time, providing greater flexibility and control over your retirement assets invested in crypto.

Consolidation and Simplification: If you’ve changed jobs multiple times, you might have several 401(k) accounts scattered across different employers. Rolling these into a single IRA simplifies your financial life, making it easier to manage and monitor your retirement savings.

IRA Options To Get Started

Rolling over an old 401(k) into an IRA can offer several significant benefits, including greater control over your investments, potentially lower fees, 24/7 access with Crypto IRAs, and the simplicity of consolidating your retirement accounts. Each of these factors can play a vital role in helping you maximize your retirement savings and secure your financial future.

As you consider your options, it’s important to evaluate your personal financial situation and retirement goals, ideally with the guidance of a financial professional. If you’re interested in rolling over your old 401(k) to an IRA, platforms like iTrustCapital offer the opportunity to buy and sell crypto and precious metals within a tax-advantaged crypto IRA*.

*Some taxes and conditions may apply.

DISCLAIMER

This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.

iTrustCapital is a cryptocurrency IRA software platform. It is not an exchange, funding portal, custodian, trust company, licensed broker, dealer, broker-dealer, investment advisor, investment manager, or adviser in the United States or elsewhere. iTrustCapital is not affiliated with and does not endorse any particular cryptocurrency, precious metal, or investment strategy.

Cryptocurrencies are a speculative investment with risk of loss. Precious metals are a speculative investment with risk of loss. Cryptocurrency is not legal tender backed by the United States government, nor is it subject to Federal Deposit Insurance Corporation (“FDIC”) insurance or protections. Clients do not receive a choice of custody partner. The self-directed purchase and sale of cryptocurrency through a cryptocurrency IRA have not been endorsed by the IRS or any regulatory agency. Historical performance is no guarantee of future results.

Some taxes and conditions may apply depending on the type of IRA account. Investors assume the risk of all purchase and sale decisions. iTrustCapital makes no guarantee or representation regarding investors’ ability to profit from any transaction or the tax implications of any transaction. iTrustCapital does not provide legal, investment or tax advice. Consult a qualified legal, investment, or tax professional.

iTrustCapital makes no representation or warranty as to the accuracy or completeness of this information and shall not have any liability for any representations (expressed or implied) or omissions from the information contained herein. iTrustCapital disclaims any and all liability to any party for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this information, which is provided as is, without warranties.