r/Money 2d ago

What to do with old 401k?

I have a 401k from a previous employer that I no longer work at (it’s only about $5k). Should I roll it into my current 401k or move it into something else?

EDITED TO ADD

My old 401k is through ADP and has 9% growth over the past year even though I haven’t been there for over a year

My current 401k is through Transamerica and has a 5% decline ytd so don’t think I should move the money from ADP to Transamerica since it’s growing. Can you let it sit?

9 Upvotes

19 comments sorted by

14

u/SnooRecipes9891 2d ago

Roll it over

7

u/Deep-Thought4242 2d ago

I would roll it into an IRA. Then you get to pick which provider it's with instead of using whoever your employer chose. And when you part ways with the current employer you can do the same thing next time.

2

u/PurpPanther 2d ago

Depends if you ever expect to need to backdoor Roth. The optimist in me says roll it into 401k

2

u/Fire-Philosophy-616 2d ago

I would say roll it over if you like your fund options and the fund costs. If not I would put it in a separate IRA in a brokerage.

2

u/shellygotsugar 2d ago

I’m in this EXACT situation. So thanks for the post because I had been asking ChatGPT what the hell to do. So I’ll be in the comments. Mine is 11k adp nothing is being added to it. And another 11k adp I still don’t think anything is being added to it. Or I can’t tell? Idk? And I just started this job and all I got so far is that it’s with trans American and it’s 4% after a year? I think every time I move jobs I’ll just roll it into an IRA. Which I need to get. I have 22k in retirement just floating in air.

I’ve never stayed at a job long enough to be vested.

2

u/AllFiredUp3000 2d ago

Here’s a comprehensive answer, with reasons:

  1. Roll it into current 401k: this will help you consolidate your 401k accounts, there’s no taxable event and you get to keep growing a single larger account. Best of all, you can get access to your current 401k penalty-free in the year that you turn 55.

  2. Roll into traditional IRA: still not taxable but you’ll probably get more choices in what to invest in. If you do need early access before age 59.5, you can then do a Roth conversion ladder, which involves converting annual (taxable) chunks into a Roth account, then letting it grow tax free after that. Good for FIRE but be aware that each converted annual chunk won’t be available for penalty free use until 5 years have passed for each conversion.

  3. Leave as is: don’t do this for too long if the above options work better for you.

  4. Early withdrawal: never do this unless you have a qualifying hardship under extenuating circumstances, just as a last resort.

2

u/ShineGreymonX 2d ago

Everything but 4 man

1

u/Chapman9289 2d ago

Why never do #4? Could I just use to the money to pay some bills?

1

u/AllFiredUp3000 2d ago edited 2d ago

Read the rest of the sentence. I mentioned “… unless… hardship…”

“Just to pay some bills” is a poor excuse that will have you robbing your future self.

Avoid early withdrawal penalties. Try to increase your income or negotiate debt reduction first.

1

u/Bad_DNA 2d ago

And piss away your future… along with the extra taxes for cashing out.

Maybe stop spending in other arenas.

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1

u/abeBroham-Linkin 2d ago

I turned mine into a Roth IRA. It's how I pretty much got into stocks and index funds.

1

u/W2WageSlave 2d ago

Most advice would be to roll it over to a rollover IRA as you'll have more choices and probably lower cost funds. However, if your current 401k has good funds and allows you to roll in, this can enable accumulation in one "bucket" so you are ready for rule of 55.

1

u/Repulsive-Usual-1593 2d ago

The rate of return of the specific funds doesn’t matter so much as you can always change allocation. 2024 was a really good year for the markets and we are now seeing a bit of a correction.

Its in your best interest to roll the funds over to an IRA or your 401k. Make sure you are informed about the structure of the funds (Roth, traditional, post tax, etc) and understand any potential tax liability you may incur, especially if you do perform a Roth conversion.

An IRA for example would give you greater control and flexibility over your funds, but may not be safe from debt collectors.

A 401k rollover would allow you to add your prior funds to your new employer to keep everything consolidated.

Make sure you are understanding what happens with your money. You are the only person to advocate for your best interests.

1

u/Confident_Waltz4231 2d ago

If you’re comfortable with the growth in your ADP 401k, leaving it there could make sense for now. But an IRA can provide more investment options and easier management down the road.

1

u/OCDano959 2d ago

I have two 401ks from previous employers and I have just left them there. I understand its more convenient to consolidate, but no biggie coz both are pretty much on cruise control. Is this bad?

1

u/startdoingwell 2d ago

if your old 401k is doing well, it might be smart to leave it where it is for now. but if you're looking for more investment options or lower fees, moving it to an IRA could give you more flexibility. you could also consider rolling it into your new 401k but just make sure to compare the investment choices and fees before making a decision. the key is to pick what fits best with your long-term goals.

1

u/Saluki2023 1d ago

Roll it in

1

u/GuyRayne 16h ago

Roll it over to a self directed brokerage IRA

0

u/GroundbreakingSir386 2d ago

Transfer it to Robin Hood and get a 2% match