If you’re among the workers moving on to better opportunities, it’s important to remember to tend to your retirement savings account at your former employer.
Nearly 4.4 million Americans quit their jobs in February, according to the latest data from the U.S. Department of Labor. That's about 100,000 more than in January and close to the 4.5 million record set in November.
Basically, finding old 401 accounts can be tricky if you lose track of them. There is, incidentally, pending legislation in Congress that would create a"lost and found" database to make locating lost accounts easier. "If you can avoid it, you don't want to cash out your 401," said Kathryn Hauer, a CFP with Wilson David Investment Advisors in Aiken, South Carolina."Doing so with a traditional 401 means you'll probably pay a 10% tax penalty."
However, the Roth money grows tax-free and is untaxed when you make qualified withdrawals down the road. In simple terms, unless you are able to come up with that amount and put it in a qualifying retirement account, it is considered a distribution that may be taxable. And, if you are under age 55 when you leave the job, you'll pay a 10% early withdrawal penalty. Workers who leave their company when they reach that age are subject to special withdrawal rules for 401 plans — more on that below.
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