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Tom: Once we find them, what do we do with these accounts?

Mellody: You have a few options here. First, you can keep the account where it is, now that you have located it. Most companies allow former employees to keep their money in their plan if it is over $5,000, but you can’t continue to make contributions or take loans. This route is not something I would recommend unless the plan has significant benefits, such as very low fees or money management services you really appreciate.

You can also roll your old 401(k) assets into an IRA. This option still allows your money to grow tax deferred, and gives you more investment options that the typical employer plan. You can also continue growing your retirement savings in a rollover IRA through IRA contributions to the account. Make sure to research IRA fees and expenses when selecting an IRA provider, though. These fees vary greatly from firm to firm.

Finally, you can roll your old accounts in to your current employer’s plan. However, not all employers will accept a rollover from a previous employer’s plan, so you will need to check with your current plan administrator. Some of the benefits of going this route include the simplicity of having one account, making it easier to track and manage, as well as broader creditor protection than an IRA. However, you want to keep in mind that an employer 401(k) plan may have a limited number of investment options compared with an IRA, and that you are subject to the new employer’s plan rules, such as transaction limits.

Tom: What about cashing them out?

Mellody: Whatever you do, do not give in to the temptation to cash them out, because you will incur big tax penalties. The consequences vary depending on your age and tax situation, but if you tap your 401(k) account before age 59½, it will generally be subject to both ordinary income taxes and a 10% early withdrawal penalty.

Tom: Always great advice. Thanks for joining us, Mellody.

Mellody: Have a great week, Tom!

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Monday Mondays: How To Track Down Old 401K Accounts  was originally published on

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