The downturn in the American economy has everyone worried. If you find yourself in the terrible position of losing your job, please don’t forget to address your 401k account. It will be the last thing on your mind. You’ll be thinking about money in a different way – not about how much money you’ll have at retirement, but how you’ll pay the mortgage. All that said, take a few minutes to check with your Human Resources department about a 401k rollover.
Since you do not have a new job to go to, you have to rollover the 401k to an IRA. In normal times, transitioning from one job to another and moving a retirement fund is a simple matter. Without a place to go, the 401k rolls over to IRA. You might be thinking to yourself that the money in the 401k looks pretty attractive right about now. Yes, there are taxes to pay and a 10% penalty, but with no income stream, maybe cashing it out is the very best use of your money. It is understandable that your thoughts stray this way. Avoid this temptation because that’s what it is. Do not fund today with tomorrow’s money. The taxes and the penalty mean that you will, at best, get a little over half of your money. In addition, statistics show that people who are getting unemployment or some other subsidy are slower to regain work than those with no income. I know it seems like a silly statistic – sort of a “grass is green” statement – but it is true that if you feel like you have a cushion, you might be less intense about your job search. So speed up your job search while ensuring your retirement fund’s growth by rolling the 401k to an IRA.
The move from 401k to IRA could be one of the best things to happen to you. With an IRA you have full control of how the money is invested. For perhaps the first time, you have complete say in how your nest egg grows.
