Money Talks News - According to the Bureau of Labor Statistics, the average late baby boomer held nearly a dozen jobs between the ages of 18 to 48.
Which begs the question: When someone gets a new job, what should they do with an old, orphaned 401K?
There are four potential choices: Leave it with the old employer, roll it into the new employer's plan, roll it into an IRA or cash it out.
Some say to eliminate one choice right off the bat: Unless someone is in dire straights, don't cash out that 401K. That is because that person will pay both taxes and penalties.
That now leaves three choices. How should someone decide what to do? They should look over all of them step by step.
Step One: Check and see what the paying fees are in both the old plan and new plan.
Step two: See how the various funds are performing in the plan and the new employer's plan.
If your fees are lower and the performance better in the old plan, leave it there. If the opposite is true, it's best move it into the new employer's plan. An added benefit of that is being able to have everything in one place which makes it easier to stay on top of.
But there's one more option, and it's the one many pros recommend: Rolling the old 401K into an IRA. That's because that's where people will potentially find the lowest fees and the most investment options.
When it comes to orphaned 401Ks, there may not be a perfect solution. But if for people who want lower fees and more investment choices, rolling to an IRA could be the best bet.
Anyone looking for more information should head to the Money Talks News website and search for "401K."