What to do with your Old Employer Plans [video]

transcript, condensed for clarity

So you've moved jobs a few times, you have a bunch of old employer plans, and you don't know what to do with them.

Here are your options:

#1 - You can keep the money where it is if it meets certain balance requirements. 

#2 - You can roll it over to a different type of account, such as an IRA.

#3 - You could potentially roll it over to your new employer's 401K plan if they allow for that, or 

#4 - You could cash it out, but there would (likely) be tax consequences for doing that.

If you have a bunch of plans, it can be confusing and overwhelming. This is how you get started evaluating which of those options is best for you

Step 1 - Grab the statements for all of those old employer plans and open up an Excel spreadsheet.

Make a list of all the accounts that you have, the names, and the type. It's really important you confirm the type. Sometimes I've had it where clients think they have a certain type of account, but they actually have a different type. You want to confirm, yes, it is a 401k, 457, 403b, Simple IRA, whatever it is, to make sure you are clear on that.

Step 2 - Look at the holdings within the account and document the expense ratio.

These are the fees that are associated with the holdings. I'm going to link in the description below a video on how to do this. Next, you want to look at the plan fees. So an employer plan typically also has admin fees, asset-based fees, and maybe even management fees. So document those. We want to get a picture of what having that account is costing you.

Step 3 - Look at the IRS Rollover Chart, which I will link in the description below.

I love this chart because it shows you the type, each type of retirement plan account, and where you can move it into. And it tells you the tax consequences for doing that. And it also tells you if, for example, you need to wait 2 years before you can roll this account over. So it's just a good double-check to be clear on what your options are. And this is also why it's really important to know what type of account you actually have.

Step 4 - Come up with a plan to simplify.

Maybe you've decided to move everything into an IRA rollover. I recommend diagramming out what you have and where it's going. I just do something like this, where I list all of the accounts. One is staying and these three are moving to an IRA - just to be able to keep track of what's happening. When money starts moving, it's a great way to confirm, yes, it got there. Once it's where it is going to be - in its new home, confirm that the asset allocation is as you want it.

Reach out to a fee-only advisor if you need help.

Any of these steps they can help you with. They can also help you just confirm that, yes, it makes sense to move it, or maybe there's a compelling reason to keep it, such as net unrealized appreciation or the age 55 exception. So there are important factors to consider before moving any money.

Reach out with any questions. My name is Linda Rogers, Owner of Planning Within Reach.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.