What to do with old 401k?

With more and more employers offering 401k plans AND more and more employees changing jobs frequently; you are bound to be asking yourself the following question:

What should you do with your ‘old’ (previous employer) 401k account?

There are 5 options:

Option 1. Leave it where it is
Option 2. Roll over to new employer 401k
Option 3. Roll over to your IRA account
Option 4. Roll over to your Roth IRA account
Option 5. Cash out

A selection needs to be made keeping in mind these 5 factors:

A. Quality of investment choices in the old 401k
B. Quality of investment choices in the new 401k
C. ETF v/s stock picking
D. MAGI consideration – back door entry to Roth IRA
E. Administrative convenience – one less account

Continue reading