Cardinal Rules Of 401k
By Kum Martin

With the job market getting so dynamic, it is quite common to see people changing their jobs more often than they change their socks! In fact, you may not find a person who has worked in the same company for more than five years. The increase in frequency in job change means that people have to deal with 401k issues more than before.

So, if you are changing your job, make sure you know the three cardinal rules of 401k.

Cardinal Rule 1
You should never cash out your 401k when you are changing your job. Statistics show that nearly 90 percent of people end up cashing out their 401k when they change their jobs. If you do it, you are wasting a lot of your hard earned money. First you would have to pay early withdrawal fees and then taxes on that amount. In the bargain you will end up losing nearly 40 percent of your money.

Cardinal Rule 2
Have the money from your 401k transferred to an IRA. Do not think of cashing out your 401k. You just have to tell your company where you want the money transferred and they will make sure it happens. Obviously you would have fill out some forms but that is easy. Beware of taking a check directly from you company. If you do so, you would have to pay taxes fees even if you deposit the check directly into an IRA. Let your company make the transfer.

Cardinal Rule 3
If you are working for a small company, keep your ears and eyes open. You keep a track of your 401k account. If your account is not moving up, it means that the company is using the 401k money to stay afloat. Then you should start thinking of stopping your 401k contribution and moving the money to an IRA immediately. You should also be looking for a new job!

Saving for your retirement should not be taken lightly.

Check Out More Articles:

01K Tax Penalty,
Rolling Over A Ugma Into A 529 College Plan ,
Beginner Guide for Stocks Bonds

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