The 401(k) question: Keep it or roll it over?
Big decisions loom for baby boomers. One of the biggest is what to do with the money they've socked away in their company-sponsored 401(k) plans.
Should you cut ties with your former company and move your money to an IRA? Or is it better to leave it where you are familiar with the options and comfortable with its safety?
Much is at stake. Boomers are retiring at a rate of 10,000 a day. In 2014, an estimated $325 billion was withdrawn from 401(k) plans as they retired. That's projected to reach $500 billion in a few years, according to Cerulli & Associates, a Boston research firm.
Still, many haven't thought much about what to do with
the 401(k).
One choice is to do nothing. "Most employers will allow that money to stay there. They will just not be making new contributions," says Paul Taghibagi, partner at Signature Estate & Investment Advisors.
"There are some pros and cons to doing that," he says. "If you leave the money there, the assets are protected from claims from creditors. If you roll it over to an IRA, that is not necessarily the case."
Taghibagi cites another reason to leave it: If you leave your job between 55 and 59 1/2, there is no 10 percent withdrawal fee from your 401(k), as there would be with an IRA. And people are not required to take a minimum distribution after age 70 1/2 if they are still working.
Marina Edwards, senior retirement consultant at Willis Towers Watson, says companies are starting to encourage employees to leave their 401(k)s unchanged when they go.
"It is a mutually beneficial arrangement," she says. "The employees have access to low-cost mutual funds. The benefit for the employer is there are more 401(k) assets. They can bargain for lower-cost investments."
Don't leave it, others say. "It's your money, take it with you, dammit," says Scott Puritz, managing director of Rebalance IRA in Bethesda, Md.
This story was originally published April 22, 2016 at 11:47 PM with the headline "The 401(k) question: Keep it or roll it over? ."