What to do with Your Multiple 401(k) Accounts

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Today's workforce changes jobs much more frequently than in the past. In fact, if you're in your twenties or thirties, you can expect to have at least four job changes in your first 10 years out of college. You might end up with a lot of employer sponsored retirement plans as a result. Here's what to do if you find yourself trying to manage multiple 401(k) accounts.

Get Organized

Before you do anything with your multiple 401(k) accounts, start by organizing all your information. Create a simple spreadsheet so you can see everything at a glance. Consider listing out the following information on your spreadsheet:

Name of the company you had the 401(k) with

The month and year you opened the account

Where the account is located or who services the account (i.e., Vanguard, Fidelity, MassMutual, etc.)

The balance of the account

Decide What You Want to Do with Old 401(k)s

If your account balance is less than $1,000, your employer may cash out your plan for you. If it's between $1,000 and $5,000, they may also automatically roll the balance into an IRA. Accounts with more than $5,000 are left for you to decide what to do with them.

The right choice will depend on your specific financial situation and what you want to do with your money. Here are the actions you can take:

Leave the account where it is. You don't have to do anything with the account. Just make sure you keep track of it. Maintaining your spreadsheet of all your financial accounts is a good way to do this.

Consolidate old 401(k) funds with your current employer's plan. Not all employers' plans allow for this, so talk to your HR department if you're interested in this option.

Roll your account into an IRA yourself. This can give you more flexibility and control over what your money is invested in while keeping it in a retirement account for your future. Vangaurd accounts are a perinnial favorite for their low-fees and consistent results, but always check the latest funds to see what's best right now. If you'd like more control over your investments, an IRA is for you. If you want to set it and forget it, stick with the 401(k). Roth IRA money goes in post-tax and 401(k) goes in pre-tax.

Cash out. The funds are yours to use as you wish after this. But if you haven't reached retirement age, this might do more financial harm than good. You have to pay a 10% penalty and income tax on the amount you withdraw.

Get Trusted, Professional Help

Confused and overwhelmed by your 401(k) situation? You can reach out to a financial advisor who can help you figure out the right action to take based on your goals. But proceed with caution: Not all financial advisors are created equally!

You want to look for an advisor who is fee-only. This means they don't get commissions or kickbacks from other companies, and won't sell you any products. You also want to make sure the advisor you work with is a fiduciary. If they won't sign a fiduciary oath on your behalf, keep looking.

XY Planning Network and NAPFA are both professional organizations of financial planners. They require all advisors listed on their sites to be fee-only and fiduciaries. Their search engines are a good place to start looking for the right professional to help you.