Okay, so you had a job. And that job offered a 401(k). And you saved money in it. Great!
Then you left the job. And you left the 401(k) there. Maybe not so great.
Because I’m betting you didn’t leave it there because you’d exhaustively researched your 401(k) investments and decided that you couldn’t find similar offerings elsewhere. Nope. I’m betting you just couldn’t be bothered.
Roughly half of American adults who have participated in a 401(k) or an equivalent retirement plan have left a retirement account at an old employer, according to a recent survey by ING Direct. And about a third of them did so because they’re unsure of the rollover process or where to put their money, don’t have time to roll it over, or have forgotten about the account. (And of these people, 1 in 5 left $50,000 or more behind.)
Oh, and 11 percent of Americans with orphaned accounts don’t know or can’t remember how much money was in there. Way to keep track, guys.
I have news for you. Rolling over your 401(k) is smart for a number of reasons:
- First of all, you’re almost certainly paying higher fees in your 401(k) than you would in a low-cost IRA (such as something you could pick up at Vanguard).
- Second, due to the nature of a 401(k) account, you’ll have a far wider array of investment options in an IRA.
- Third, if you combine your 401(k) money with an existing IRA or at a brokerage house where you already have an account, you’re much less likely to forget about it. (Translation: There’s a chance you’ll rebalance it on occasion.)
Need to choose investments for the money once you roll it over? Find that article here.
Really, kids. Try it out.
(Super cute photo from cholmondelly on Flickr.)