What to do With Your 401(k) if You’ve Lost Your Job
If you’ve lost your job during this pandemic, you might be wondering what your options are to supplement your lifestyle. Millions of Americans have applied for unemployment during this time. Some have looked to savings to get them by. In a study done by Pew Research Center with 13,200 participants, one-in-four adults have had trouble paying their bills since the outbreak. 25% say they lost their jobs. Half indicate they have yet to return. A large percentage that we’re able to keep their jobs had to take a pay reduction. Nearly a third of participants had to turn to savings. It’s safe to say that this is also the case for many more Americans outside of this study.
If you’ve been putting money into a retirement fund with your current company, it can be a bit daunting figuring out what happens next. There are a few options. You can either withdraw, transfer, or leave the money where it is. Each possibility will offer a set of benefits and consequences. It’s important to look at your particular situation to decide what is best for you.
This can offer immediate help if you have lost your job and need money quickly. There is a pretty heavy downside. You will incur fees and an income tax must be paid on the distribution. This will be seen as taxable income at the end of the year. Depending on the amount saved, you might want to consider another option of income during this time.
Leaving your 401(k) at your previous company can allow the investment to grow. You need at least $5,000 in your account for your previous employer to be able to keep it at their company. The issue with this though is you won’t be able to have much say in the investment. You will no longer be able to add money to it.
Moving your money into an IRA, annuity, or mutual fund will allow you to have more of a say in your investment options. You will lose some money with transfer fees, but you would not have to deal with your prior company. This can be a very uncomfortable situation if you’ve lost your job.
You don’t have to have all the answers or know the ins and outs of 401(k) options. Concord Financial Alliance is a full-service investment agency that can help you navigate this extremely difficult time. They can help you understand the best route for you and your current situation, while also helping you prepare for your future.