Leaving your 401(k) with your previous employer when changing jobs has both advantages and disadvantages. Here are some of the key points to consider:
- Convenience: Keeping your 401(k) with your previous employer can be convenient, as you don't have to deal with transferring funds or setting up a new retirement account.
- Access to Investments: Some 401(k) plans offer access to investment options that may not be available in an individual retirement account (IRA).
- Creditor Protection: 401(k) funds are typically protected from creditors under federal law, which can provide an additional layer of security.
- Retirement Readiness: By leaving your 401(k) untouched, you can potentially accumulate more savings for retirement over time.
- Limited Investment Options: Some 401(k) plans have limited investment options compared to an IRA, which may restrict your ability to diversify your portfolio.
- Fees: 401(k) plans may have higher fees than IRAs, which can eat into your investment returns over time.
- Less Control: You have less control over your investments in a 401(k) compared to an IRA, where you can choose the investment firm and the specific investments.
- Forgetting About It: There's a risk of forgetting about your 401(k) if you change jobs frequently, which could lead to lost or unclaimed retirement savings.
It's important to weigh these pros and cons carefully and consider your individual financial situation and retirement goals before deciding whether to leave your 401(k) with your previous employer or roll it over into an IRA or your new employer's plan