It's Your Money: Take Control of 401(k)

Roth IRA conversions and changes in IRS rules

When you leave a job where you've been accruing retirement savings in a 401(k) account you have a choice to make. There are four basic options:

Leave the money in your old employers 401(k) program. No fuss, no muss. That money is yours and will remain yours even if you don't do anything with it. The problem is, you're now tied to the investment choices you had with your old employer's program. And, you might be paying fees for the account which diminish the total value you'll receive when you retire.

Take your money with you. Assuming you have a new job with a company that offers a 401(k) plan, you can roll over your retirement savings into a 401(k) account at your new job with no penalties. It keeps your retirement savings in one place, but you are still limited in your investing options by the plan your new employer offers.

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Take control with an Individual Retirement Account. You can roll your savings into an IRA of your choice. There are no-fee, no-penalty options with an IRA roll over and you control the investment choices for your future retirement.

Cash it out. You can take the money out of your 401(k) when you leave a job, but this option is dangerous from a financial perspective. You'll pay a 10 percent penalty for early withdrawal and you'll pay regular income taxes on the proceeds, so that healthy nest egg for your golden years can quickly become a tiny collection of pennies. It's short-term thinking that dramatically affects your long-term financial health.

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