Have you changed jobs in the last few years? Or retired? If you are like a lot of people you may have left your company retirement plan behind. Doing something about it was not a priority and besides, you were not really sure what you should do.
I recently read that every day in America 10,000 people are retiring. In top of that, millions have lost their jobs during the recession and finding a new job has had a higher priority than doing something about your 401(k).
Now it looks that a growing number of companies are going to force the departed employees off their rolls. The fact is that it costs companies to maintain retirement plans and those costs are often tied to the number of people in the plans. It costs your former employer to maintain the records and when times are tough, even these costs are going to be pared.
These people may not know it but their old employer is doing them a favor. Money left in old 401(k) plans is rarely managed the way that it should be. But what should people do with “orphan” 401(k) plans.
There are a few things that they can do, but first let’s mention what should not be done.
Here are the choices you have which can retain the tax deferral and allow you to use the money during retirement.
That still leaves you with the challenge of making the appropriate investment decisions. Before making the decision regarding which investments to make, let me suggest an intermediate step. Prepare a plan or have a financial professional prepare a plan for you.
I wise man once said that if you don’t care where you’re going any road will take you there. Planning is one of the most overlooked things that people do with regard to their retirement. A plan of some kind should always precede making investment decisions. It doesn’t have to be an elaborate plan document with a hundred pages of numbers, tables, and graphs. Like fixing your car or writing a will you may be able to do it yourself, but you are better off getting someone who has the proper tools to do it for you.
The plan should provide you with the kind of guidance you need to determine how your should structure your investments, whether you need to save more, or how much you can expect to be able to spend once you are retired. But one of the keys to successfully meeting your goals is to avoid leaving the money you have saved for your retirement scattered around in various “orphan” accounts at former employers.
Arie J. Korving, a CERTIFIED FINANCIAL PLANNER™ professional, has been delivering customized wealth management solutions to his clients for more than three decades. Prior to co-founding Korving & Company, he was First Vice President with UBS Wealth Management and held management positions with General Electric.