They're called orphans. They're the sad, lonely 401(k)s that workers leave behind when they change jobs.
What should you do if you have one? Well, you have four choices:
- You could leave it with your old employer.
- You could roll it into a 401(k) at your new employer.
- You could roll it into an IRA of your choosing.
- You could cash it out.
Now, forget we ever mentioned No. 4 because it is not just a bad idea, it's a very, very bad idea. Cashing out your 401(k) has the potential to put you back at square one for retirement savings. What's more, you'll pay a 10 percent penalty on that money plus income taxes if you're younger than 59 1/2. Trust us, that's not going to look pretty come April 15.
Instead, you should consider what type of retirement fund you want to hold your money. There's nothing wrong with keeping your cash in a 401(k), but might we suggest an IRA could be a better choice?
Click ahead for a look at five reasons why you should consider rolling over your old 401(k) account into an IRA.