401K Plan--Quitting Job?

Question

If I sign up for the 401K Retirement Plan through my current employer, what happens when I quit and find a new job?

Will my as-to-date savings in 401K be transferred anywhere I go...I mean, like will I still have the plan or does it cancel because I quit?

Answer 1

Any money you contribute and its subsequent earnings are legally yours. When you leave your job you will have the option of leaving your money with them or transferring to another account. (Or, you can just take a payout. But this is not advised until you hit retirement, because you pay a tax penalty for taking a payout before age 60.)

To transfer, you will enact a Direct Rollover to your new employer's 401(k) or to an Individual Retirement Account (IRA) that you set up yourself. By rolling over money, you keep your money in a tax-deferred account and pay no taxes that year. This is the beauty of 401(k)'s and other types of employer-sponsored retirement accounts: they are portable.

Now, just because you legally CAN rollover money to your new employer does not mean your new employer is required to accept it. They can reject your rollover. In that case, just rollover to an IRA. By law, 401(k) plans are REQUIRED to give you the option of a direct rollover when you leave your job. So, they cannot legally hold onto your money, unless you give them permission to. However, be aware that the rollover process may take several months to complete.

Sign up for your retirement account as soon as possible. This will allow the effects of compounding to work to their fullest.

I have a free book on retirement investing and this question is addressed in chapter 24. Click on my profile and read the info to get the site.

Answer 2

One of the most common retirement plans is the 401 K. In a 401 K, some amount is deducted monthly from your pay check. The money is tax deferred and so you do not pay taxes on the amount invested. Usually there are various investment choices like mutual funds, stocks, bonds etc. In some cases, the employer will match the employee’s contribution to the account, though these instances are decreasing.

Answer 3

Depends on the plan and the company. You always have the option to roll it over to your new company plan or into another retirement account (like a Roth IRA). Some company plans let you keep the money where it is if you like.

Just check with your HR department.

Answer 4

depends on the plan and how much you have invested...
usually there are 3 options:
1. keep it at your former employer (often only available if over a certain amount)
2. Roll it into your new employers 401k plan
3. roll it into a traditional IRA

Answer 5

Here is some very useful information about 401k plans:
http://en.wikipedia.org/wiki/401(k)

I recommend that you talk with either your human resources (personnel) department for or with the investment company/financial management company who's handling your 401k for full clarification

Answer 6

Depends on the plan and the company. You should always have the option to roll it over to your new company plan or into another retirement account (like a Roth IRA). Some company plans let you keep the money where it is if you like.(most don't) Just check with your department.