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Fund your 401(k) or IRA first?

Retirement » Fund Your 401(k) Or IRA First?

Do you plan to stay with your employer?
Do you plan to stay with your employer?

Your 401(k) is like your briefcase: You can take it with you when you leave your job.

But there could be limits on whether your employer's matching money goes, too.

Some companies pay out their matches in a lump sum at the end of the year, says David Bendix, CPA/PFS, CFP, president of The Bendix Financial Group. If you're not there when they dole it out, you're out of luck.

Others have what's called a "vesting schedule," he says. While the employer puts money in your account, it becomes yours in increments over time. You get to keep the entire matching contribution after you've been with your employer for a predetermined length of time, typically five years, says Bendix.

Bottom line: "In any short-term employment, you're probably not going to get much from the match," says Bendix.

Some 401(k) plans also levy back-end and surrender fees if you remove your money from the plan.

So how do you inquire about exit costs without sending up a red flag?

Ask the plan administrator to provide a comprehensive list of fees and expenses, says Bendix.

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