With more people changing jobs frequently during their working careers, many of your clients will have a number of old 401(k) accounts over the course of their working lives. They will need your help in managing these key retirement savings as part of their overall financial and retirement planning efforts. For those clients who may end up losing their jobs in light of the economic downturn caused by the coronavirus, your guidance is especially critical at this juncture.
Weighing Your Client’s Options
The main options for your client include:
- Leave the money in their old 401(k) plan
- Roll the money over to a new employer’s 401(k) plan if applicable and if the new employer’s plan allows for this
- Roll the funds to an IRA account
- Utilize the net unrealized appreciation (NUA) rules if the client holds company stock in the plan
- Take a distribution of some or all of the money
Depending upon your client’s situation, any of these options can make sense. NUA is a very specialized situation and we won’t cover this below. Taking a distribution is usually not desirable, but in some cases, might be necessary for your client.
Pros and Cons of Various Options
Leaving the money in their old 401(k) plan