Statistics suggest, baby boomers could have one or more 401(k) accounts with a former employer and they have yet to reach the age of retirement.

 

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According to the U.S. Bureau of Labor Statistics, "The average person born in the latter years of the baby boom (1957-1964) held 11.7 jobs from age 18 to age 48." For the eldest in this group, those born 1957-1959), the Social Security Administration defines "normal retirement age" or the "full benefit" retirement age as 66. For those in this group born in 1960 or later, it will gradually rise to age 67. 

This means, baby boomers could have one or more 401(k) accounts with a former employer and they have yet to reach the age of retirement.

So, what to do with the assets you left in your former employer(s) plan? 

If you participated in a 401(k) with a former employer and you left the funds in the plan when you took a new job, you have options for investing the money in another retirement account.

You can opt to “rollover” the fund to your new employer's qualified plan or you can do a rollover to an individual retirement account (IRA). With a rollover, the company distributes your plan assets to you in a check. It is up to you to transfer those assets to your new employer plan or an IRA within 60 days of the date you receive the distribution in order to maintain the tax-deferred status of those assets. If you fail to meet the requirements, income taxes on the entire distribution and early withdrawal penalties will apply.

Leaving the funds in the old plan may have certain benefits. If you are satisfied with the performance and find any associated fees to be customary and reasonable, there may be no reason to move the assets.

What we see most often, is that people tend to forget about managing and monitoring these investments. It is important, particularly as you approach certain life stages, that you understand how and where your funds are invested and what the associated plan costs are.

Risk tolerance is a critical component of investment strategy. Among other things, risk tolerance takes into account your entire personal financial scenario, your timeline for when the invested funds are expected to be needed, and your overall comfort level and ability to withstand with the potential volatility of an investment vehicle.

All too often, clients come to us with plan investments they have not evaluated in years.

If you have a 401(k) account at a former employer, start by reviewing your statements to understand where and how your plan assets are invested. Many plans are invested in mutual funds through a major investment firm where you can call with questions. Look for a customer service number on your statement.

If you would like help reviewing your statements and understanding your options, Great Bay Insurance Agency can help.

We can help you to evaluate whether your current strategy is appropriate for your life stage and risk tolerance, as well as evaluate the performance and fees associated with your current investment. We will provide recommendations accordingly.

Should you decide to move the funds from your current plan to an Individual Retirement Account, we can facilitate a “direct trustee to trustee transfer” on your behalf. We advocate this method because it goes directly from your company plan to your IRA and won’t trigger an unintended tax or penalty.

Every personal scenario is different and our experienced licensed agents are here to answer your questions and if necessary, handle all of the paperwork to safely and securely transfer your account.

It starts with a conversation. Contact us today for a free consultation at 603.743.4247.

Jim Fontaine
Thanks for the timely information in this article!