401k Questions

What should my old employer be sending me about my 401k?

Question: What is my old company required to send me regarding my 401(k)?

I was searching around on what to do with my 401k since I changed jobs and my new employer does not offer a 401k plan. I haven’t gotten any updates from my previous employer as to what is going on with my 401k. How often and what type of statements should my old company be sending me? What should I be asking them about getting a new retirement account setup.

Answer:

You should continue to get the same periodic statements that you got before as long as the 401k custodian is kept updated of your address.

You can rollover your 401(k) into a Traditional IRA or Rollover IRA. If you don’t have an IRA, you should open one with a broker of your choice and then contact your employer to request a trustee-to-trustee transfer of the funds.… Read More »

Can I contribute to both a 401k and IRA?

Question: Can I contribute to both and IRA and 401k at the same time?

I am planning on getting a Traditional IRA plan so I can put away $5,000 tax-free for this year. However, my company has been discussing offering a 401(k) plan to employees.

If I invest $5,000 into a Traditional IRA account this year and my company introduces a 401k plan later this year, am I still able to contribute to both my IRA and 401k in the same year?

I would appreciate any guidance.

Answer:

You, you can contribute to both a 401k and IRA. If you have the financial ability to contribute to both, you should. You also have the option of contributing to a Roth IRA with your after-tax income in order to allow that money to grow tax free as long as you are under the income limitations that apply to a Roth IRA. However, with the Traditional IRA, you can contribute up to $5,000 in 2012, while still being able to contribute up $17,000 to your 401(k) in 2012.… Read More »

How should I invest in a 401(k) if I intend to leave the employer?

Question: How should I invest my 401K if I intend to leave my current employer after 1 year?

I intend to leave my current employer in approximately one year and then move my 401k into another 401k or IRA. Does it make sense to just keep everything in a money market fund? Would I have to stay with the same funds for 5 or more years to reap any benefits from the stock market?

Answer:

You can’t move a 401k into another 401k, but you do have the ability to roll it over into an IRA. Which assets you pick depends on your desired asset allocation and the amount of risk you would like to take. If you are young and aggressive, invest and equities. If you are nearing retirement age and conservative, opt towards bonds and money-market funds.

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Where should I put my 401k savings until I am able to contribute again?

Question: Where should I put my 401k savings until I am able to contribute again?

I recently switched companies and cannot contribute to my new 401k for a year. I want to continue to save and would like to put a percentage of my savings into the 401k once it becomes available to me. Is this possible? What would be the best option for me in order to save for retirement? Should I create a Traditional IRA or Roth IRA?

Answer:

I would recommend starting an IRA. Please note that you can never roll money from an IRA into a 401k plan later on. There wouldn’t be any advantage to that even if it were possible. Only existing 401k balances can be rolled into another 401k. The one disadvantage of creating the IRA is that you do not get a company match like you would with a 401k. There are significant tax savings with a Roth IRA that you should read about.… Read More »

What should I do with the 401k from my previous employer?

Question: What should I do with the 401k from my previous employer?

I had a 401(k) plan with the company that I previously worked with. After I left this company, I never ended up doing anything with this account. I was wondering how I would be able to access it and what I should do with it. My current employer does not offer a 401(k) so I’m not able to roll it over. What do you think I should do?

Answer:

The 401(k) account will always be yours. You have the option to leave it with your previous employer, you can transfer it to a future employer that does offer a 401(k), or you can also roll it over into an IRA. I would recommend rolling the 401(k) into an IRA. The only caveat however is that the company that you open the IRA with might not offer the same funds, so you would need to make sure you like the fund options available with the company that you open the IRA with.… Read More »