What Happens to 401(K) When You Leave Your Job
So getting now into rollovers first, how much do you get to take with you? You always get to take your contributions to a retirement plan. We're really switching back here to people that are traditionally employed might get an employer match four oh one K. Offering or four and three B. Don't stress the money you put into your 40. And K. You always get to walk out the door with, that's your money. Now, you may not be able to walk away with all of your employer's contributions because sometimes there are some fun catches. It's known as something called a vesting schedule. There are three different types. It is immediate graded and cliff. So this determines how much of your employer's contributions. You get to walk away with immediate means. If you walk out the door three months after starting and you already signed up immediately for your 401 K. And they put money in, you get to walk out the door with it, it doesn't matter when you leave, you always get to walk away with yours and your e...
mployer contributions invests immediately says obviously the creme de la creme of vesting options, which means it's pretty rare. Next is graded. So what happens is each year, a percentage of your employer contributions vest, so in year one it might be zero. So if you left after the first year, you only get to take your money, not the money that your employer put in and Cliff is the worst. Cliff is you have to wait until the very end when it fully vests around usually year four or five. So if you walk away and years one through three or one through four, that's it. You're not taking any of your employer contributions with you. The simplest thing is to roll it over and there's two different ways you can do this. If you're going to a new company with a four oh one K. Plan, it's possible to roll it into your new employer's four oh one K. Depends some employers allow it, some don't, but that is one option. Another is to just roll it over into an ira for yourself, something that you can be controlling. So maybe you have a new company for O and K and an Ira. But how do you roll it over first? You have to decide which brokerage you want to use. Now this is assuming of course that you're not rolling it over into a new employer's account. It's for you into an ira. Examples of brokerages include things like Fidelity, Vanguard, Charles, Schwab betterment being a robo advisor. Other robo advisers often do iras now as well, you open your rollover ira. Typically you log in and immediately see the option for a rollover. Trust me, they want your money, they make this very simple for you and then you have to contact your old employers four oh one K. Plan administrator. So that actually might be one of these guys. Sometimes your company used Fidelity or vanguard anyway. So it makes it really easy, you just call them up and say, hey, I want to roll this out into an ira easy peasy. Sometimes you have to have called them up and have them send a check to the new guys in order to roll it over and then you select your investments again, target date fund if you don't know what else to do. Otherwise building your portfolio, however, you'd like a big thing here is don't be afraid to get on the phone.