What are you supposed to do with your 401k after you leave your employer?

Question

I recently started an internship for a company that offered a 401k program so I decided to get a head start on retirement and invest. However, I am entering graduate school in the fall and will no longer be with the company. Do you have to rollover your funds immediately after you leave your employer or can you wait until you start a new job before you roll them over?

Answer 1

I opened an IRA with Vanguard.  They helped me with the paperwork to get the 401k money from my employer and put it in a mutual fund.

Answer 2

Since this is a recent 401k program you won't have any vesting in the plan and will only be able to roll over the amount you put into the plan.

Whether or not you can keep the money in its current plan will depend upon the company.   Even if you have the option of leaving it there most people prefer to roll it into there own plan.

Consider someone like Fidelity.  (I'm not an employee, but, that is where my accounts are.)  You could roll it into several types of investment vehicles.  Speak to an accountant or one of their representatives to find out which is best for you.  

Some people make a point of switching jobs as soon as they are vested so that they can roll the funds into their own plan.  The belief is that this is safer than leaving your 401k funds with just one employer.  Think Enron.

Some people like to put the funds into a mutual fund and forget about them.  Others like to put them into an account that allows them to trade stocks with it.

You have a lot of options.

Answer 3

The company can decide to force you to take a distribution, called a force out, but it depends on the amount you have in your account, but there are rules that govern this.  If you have more than $5,000 they cannot force you to take your money out.  The last time I checked if you have $1,000 to $5,000 they may have to open an IRA for you benefit and roll the funds there if they want to force you out.  Most employers will not go to the trouble.  If you have less than $1,000 they can, it "can" depend on the size of the company; in my experience smaller companies are less likely to force you out regardless of your account size.  However if you worked for someone large, say over 500 employees they may automatically force you out based on what I mentioned before.

Sounds like you were not there very long and if you were like me I was not getting rich or socking away a lot when I was an intern.  The best thing to do is call your old HR dept.  They will be able to tell you the answer and I promise that you are not the first person to ask them this question, if they don't know they really should, and will be able to find out and let you know.

If you leave it there I think your account should be ok as long as you have diversified allocation.  Someone mentioned Enron.  The only reason people at Enron got screwed is because they had their entire account in Enron stock and the trading of the stock was frozen in the 401k plan, which is now illegal without proper notification 30 days in advance.  Your performance will be the same as if you had still been working there.

Answer 4

it is insane to leave a 401k at an old job ...when you leave more than likely your funds are managed in a diff way in other words less preferably since you are no loger with the company you are no longer a top priority....be sure to get that rolled over and in understanding that process speak to a financial advisor ...they are specialist in doing this type of work and they can look into your plans and make calls for u to find out what your privlages r with you old 401k in reguards to the company you use to work for

Answer 5

If your employer requires you to roll it over you can roll it over into an IRA and then into a new employers plan when you get another job.  But, if you contribute to the IRA then you lose the opportunity to roll it into a new employers plan.

Answer 6

It depends on your employer.  Some allow ex-employees to keep their funds with them, and some want you to move them. Ask HR for a definitive answer. If you have to move it right away, you can always roll it into an IRA which can then stay invested until you are 70 1/2, if you choose.

Answer 7

It depends on your employer. But I would roll it over into your next employers 401 K plan. It will kick start your plan there.