Here’s today question. It comes from Alina. Alina says, “I currently have a 401k through my employer. I plan to go to another job where it’s not offered. Should I move it to an IRA or leave it where it is?”

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If you are someone who has recently left your job, or are planning to leave soon, you may be wondering what you should do with your 401K plan. Should you leave it with your former employer, or roll it over into a new plan? This is an important decision, and there are a few things that you should consider before making a final choice.

Firstly, it’s important to understand that leaving your 401K with your former employer is an option. Most employers allow you to keep your account with them even after you have left the company. This can be a convenient choice, as there is no need to transfer your account or set up a new one. You can continue to manage your investments as usual and can even make changes to your plan if you wish.

However, there are some downsides to leaving your 401K with your former employer. One of the biggest concerns is the potential for high fees. Employer-sponsored plans often have higher fees than individual retirement accounts (IRAs), and these fees can eat into your savings over time. Additionally, if you have multiple 401K plans with multiple employers, you may find it difficult to keep track of all of your investments and make changes as needed.

Another consideration is that by leaving your 401K with your former employer, you may be limiting your investment choices. Your former employer’s plan may only offer a limited number of investment options, and you may not be able to invest in certain types of assets (such as real estate or commodities) that you can invest in with an IRA. This can limit your ability to diversify your portfolio and potentially lower your returns.

On the other hand, rolling over your 401K into an IRA can also have its drawbacks. One of the biggest concerns is the potential for high fees. There may be set-up fees, annual maintenance fees, and potentially higher investment fees. Additionally, if you choose to work with a financial advisor, they may charge a fee for managing your investments.

However, there can be several benefits to rolling over your 401K into an IRA. One of these is greater investment flexibility. With an IRA, you can choose from a wider range of investment options, including individual stocks, bonds, mutual funds, and more. This can allow you to diversify your portfolio and potentially increase your returns.

Another benefit of an IRA is that you can consolidate all of your retirement accounts in one place. If you have multiple 401K plans with different employers, rolling them over into an IRA can make it easier to manage your investments and make changes as needed.

Ultimately, the decision to leave your 401K with your former employer or roll it over into an IRA depends on your individual circumstances and preferences. If you are happy with your current investment options and manage your 401K easily, it may make sense to leave it with your former employer. However, if you are looking for greater investment flexibility, simplicity in managing your accounts, and lower fees, rolling over your 401K into an IRA may be the better choice.

Whichever decision you make, it’s important to consider all of your options carefully and consult with a financial professional to ensure that you are making the best decision for your unique situation.