COLORADO SPRINGS – Dealing with a 401(k) after switching jobs can be a mystery for employees.
Many people aren’t sure what to do with them which could lead to serious mistakes.
Carl Carlson said, “80 percent of folks, I would say in general, are making mistakes when they’re moving from companies.”
As CEO of Carlson Financial, he has some do’s and don’ts for the working crowd.
“I’ll tell you first of all what not to do. Don’t take the money out of the 401(k) because that causes taxes.”
Most people tend to do a roll over. Carlson’s warning with this is to “make sure that if you left and you have a loan on your 401(k) that you pay the loan back before you roll the money over.”
It may be an easy move going from one 401(k) to another, but Carlson said going this route can sometimes mean paying fees.
“Generally what I would recommend is that you rollover the money from the 401(k) to an IRA…but make sure also what kind of fees are you going to be paying on the new IRA.”
While most people aren’t just withdrawing the money, Carlson said a majority of people aren’t considering all their options.
“Not really being careful with where you’re going with the money, how you’re investing the money…it may not seem so important now, but 15, 20, 30 years from now when you look back that was a very important decision you made.”
In short, do your research and remember that it’s your retirement money on the line.
Another tip from Carlson: if you withdraw your 401(k) funds and you’re younger than 59 1/2 there’s a 10 percent penalty that has to be paid.
Carlson Financial is a sponsor of Financial Focus.