According to a study from the U.S. Government Accountability Office (GAO), more than 25 million Americans left their 401(k) balance in a former employer’s plan during the 10-year period from 2004 through 2013.1 There’s nothing technically wrong with leaving your balance in the old plan, but it could create challenges as you plan for retirement.
If your old employer is ever sold or goes out of business, you may lose access to the plan. Even if the company changes 401(k) providers, you may find it difficult to navigate the new system and manage your funds.
Fortunately, you have options available. Below are three possible approaches. Consider your unique needs and goals before taking action. Also, you may want to consult with a financial professional to help you determine which option is best for you.
Are you one of the fortunate few who will be able to rely on a pension in retirement? Pensions are quickly disappearing from employer benefit menus. In 1998, 58 percent of Fortune 500 companies offered pensions, also known as defined benefit plans. By 2015 that figure was down to 20 percent.1
The shift away from pensions is largely due to the growing popularity of the 401(k), which is known as a defined contribution plan. In a pension, the employer is responsible for funding the plan and providing a retirement benefit. In a 401(k) and similar plans, the employer may make some contributions, but the funding responsibility largely lies with the employee.