retirement

What should I do with my old 401(k) plan?

Don TaylorDear Dr. Don,
I just started a new job, and I'm wondering what I should do with my old 401(k) plan from my previous employer. My new employer also offers a 401(k) plan. Can I still continue to contribute to my old 401(k) plan? What are my contribution limitations?

Thanks,
-- Dan Deduction

Dear Dan,
You can't keep contributing to your former employer's 401(k) plan. Those contributions were deferred income and, since the employer isn't paying you anymore, you don't have anything to contribute.

Assuming you don't want to cash out, you have three basic choices with your old 401(k) plan account. You can keep it invested with your former employer, move it into your current employer's 401(k) plan (if that plan allows it), or roll it over into a traditional or Roth individual retirement account. I think the decision should be based on the investment choices that are available to you, the account fees and the expenses. Also, if you're moving the money, try a direct (or trustee-to-trustee) transfer so the funds won't be subject to mandatory withholding.

You could consider rolling the money into a Roth IRA from your former employer's 401(k) plan. You would owe income tax on the conversion, but qualified distributions out of the account would be tax-free. Roth IRA conversions make sense if you can pay the taxes from investments or savings accounts that aren't tax-advantaged, and you expect to be in a higher tax bracket when you retire. Talk with your tax professional if you're not certain if this is the case for you.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed, 0 point 4.32%  0.06 4.26%
15 year fixed, 0 point 3.36%  0.09 3.27%
5/1 ARM 3.37%  0.10 3.27%
 
View Rates in your area Search
Product Rate Change Last week
30K FICO-based HELOC 4.74%  0.01 4.75%
50K FICO-based HELOC 4.51%  0.01 4.50%
100K FICO-based HELOC 4.24% --0.00 4.24%
 
View Rates in your area Search
Product Rate Change Last week
60 month used car loan 2.86%  0.20 3.06%
48 month used car loan 2.79%  0.40 3.19%
60 month new car loan 2.94%  0.10 2.84%
 
View Rates in your area Search
Product Rate Change Last week
1 Year CD 0.90%  0.02 0.88%
2 Year CD 1.02%  0.01 1.03%
5 Year CD 1.59%  0.01 1.60%
 
View Rates in your area Search
Product Rate Change Last week
Balance Transfer Cards 15.71%  0.01 15.70%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.91% --0.00 10.91%
 
Search
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Blog

Jennie Phipps

Don’t let divorce ruin retirement

Divorce carefully, or as Gwyneth Paltrow says, practice "conscious uncoupling."  ... Read more

advertisement
Partner Center
advertisement

Connect with us