the best option for a 401k under $500?

Question

i just started contributing to my 401k about a year a go it is roughly under $400 , and i am considerin leavin my job within a year because im leavin out of the country . what would be my best option?

Answer 1

Since you only have $400 in 401k, you can not continue it in your 401k. Most companies will allow you to continue money in 401k after leaving job, only if you have atleast $5000.

So, you will have to take out money from that 401k. You have following choices

1. Take it cash. But in this case, you will pay tax and a 10% penalty. So, in effect you will get less than say $300.

2. You can roll it over to an IRA. Since most of the mutual funds require a minimum of $2500, you can either put this money into some bank CD (designated as an IRA CD). Or else buy some blue chip stock and let it grow. for $400, you can buy say 7 citigroup stocks or say 13 Microsoft stocks.

Your decision depends on your situation. If you are planning to leave US for good, and plan never to come back, I would rather say that go with option 1. Get cash. You do not want hassle to maintain an account in US while you are abroad. (just my personal opinion).

If you plan to come back to US at some point of time, I would suggest option 2. When you come back, you can add money to the IRA that you have maintained.

Good luck

Answer 2

Diversify your holdings. You want some international, some growth, and some value. The more risk you feel comfortable with, the more int'l and growth you should hold.

When you leave the country, you can leave you investments in the 401k, which will continue to grow. Don't pull your investments out just because you are changing your job.