Why you shouldn’t cash out your 401K

Don't cash out that 401K

RICHMOND, VA (WWBT) - The average American will hold ten different jobs - before age forty.

That’s according to federal statistics right now.

Millennials will likely have even more.

When you leave one job for another one of the things you have to figure out is what to do with your old 401K.

Your options include keeping the money where it is, rolling it into an IRA or new 401K or cashing out.

That last one is a really bad idea! This is a shocking statistic: Americans lost track of more than $7.7 billion dollars' worth of retirement savings in 2015!

Much of that comes from people’s old 401K accounts, from a job or two or three ago.

That’s a fortune in lost money, so if you’re in this boat, it’s worth your while to track down the paperwork for your old account.

If you can’t find it, call HR at your old company.

You’ll need to give them your name, dates of employment and your social security number - but then you’ll get that account information.

Once you get a look at that balance and can evaluate that plan’s performance, make some decisions.

If that plan gives you a good range of low-cost, solid performance options, you could leave it there and keep an eye on it.

Or you could roll it into your new 401K, if that’s a better fit for you, or roll it into a new IRA.

What you do not want to do is cash out that old 401K plan.

You’ll pay income taxes on the money, and a 10% penalty, if you’re under age 59 1/2!

All told that could cost you nearly half of the balance, depending on your tax bracket.

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