401(k) Options

Have you left a 401(k) behind?

It’s called a “stranded 401(k),” and it’s more common than you might think. In fact, the Retirement Clearinghouse reports that approximately 10 million people with a 401(k) plan change jobs each year and about one-quarter of them leave money behind in their 401(k). If that’s you, don’t worry. You have options.

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"Sixty-five percent of workers are offered a 401(k) or similar plan by their employers."1

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"Number of jobs the average worker born between 1957 and 1964 holds from age 18 to 52."2

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"Among workers offered a 401(k) or similar employee funded retirement plan, nearly three in four women (73 percent) are currently participating in their company’s plan."1

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Four Options For Your 401(k).

First, it’s important to know that the amount of money you have in your 401(k) might make your decision for you:

  • For accounts with less than $1,000, employers are allowed to automatically cash out your account when you leave.
  • For accounts between $1,000 and $5,000, most employers will automatically roll your 401(k) into an IRA.

If you’ve built up more than $5,000 in your 401(k), however, the choice is up to you. And you have four very clear options.

1
Leave it.

Leaving your money in your old 401(k) is the path of least resistance. You don’t have to do a thing. But don’t let that be the deciding factor. Consider whether you’ve been pleased with your plan’s performance. Understand how, as a former employee, you will receive important information about plan changes and investment options. Remember, too, that you won’t be able to contribute any more money to the plan.

2
Move It.

Moving your money to your new employer’s 401(k) plan can be an attractive option as it keeps your savings under one account, which will be easier to keep track of. Keep in mind that moving your old plan to your new job may have limitations. Not all defined contribution plans allow this move, and some will limit the choices you have.

3
Take It.

Cashing out is the flashy option. Suddenly, you have extra money for a new car or that trip to Italy you’ve been dreaming about. However, it’s also may be a pricey option. You may be subject to income tax on the entire amount of the distribution. Additionally, a 10% early withdrawal penalty might apply if you aren’t yet 59 ½ years old. Finally, your money will no longer have the advantages of tax-deferred growth.

4
Roll It Over.

Rolling your old 401(k) balance into an IRA rollover account is a popular option for many people. With an IRA, you’ll likely get a wider range of investment options than a 401(k) offers. Plus, you can move the money from your old employer into a traditional IRA without getting hit with taxes. (Moving your money into a Roth IRA, on the other hand, is taxable.) Be sure to look at the fees of the IRA—are they lower than those associated with your 401(k)? Also look to see if the IRA has more low-cost investment choices such as exchange-traded funds or passive index funds that can lower the cost of investing even further.

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"More than six in ten workers are offered a 401(k) or similar plan by their employers."1

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"The 401(k) contribution limit increased by $500 for 2020."3

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"77% of private industry workers who have a 401(k) plan available to them participate in that plan."4

BOK Financial Corporation (BOKF) offers wealth management and trust services through various affiliate companies and non-bank subsidiaries including advisory services offered by BOKF, NA and its subsidiaries BOK Financial Asset Management, Inc. and Cavanal Hill Investment Management, Inc. each an SEC registered investment adviser. BOKF offers additional investment services and products through its subsidiary BOK Financial Securities, Inc., a broker/dealer, member FINRA/SIPC, and an SEC registered investment adviser and BOK Financial Private Wealth, Inc., also an SEC registered investment adviser.

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