Why you should take your 401K with you when you take a new job

When you take a new job, one of the things you most likely aren’t thinking about is your 401K from your previous employer.   You should, though.   Many employers start passing on fees that they would have previously covered when you were an employee.   You also have more say on what happens to your investments by either moving them into your new 401K plan, or better yet, opening a Traditional IRA Account.  

I had four 401K accounts and a TSP account from my time in the military as well as past employers.   Each one had a few thousand dollars in it, but not only did I not have much control, some were charging fees and it was hard to keep up with all the individual rules that each plan came with.   I decided to open a Traditional IRA account and I reached out to all my past employers’ providers and requested a transfer to my IRA.   There are two types of IRA’s, Traditional, which you contribute to pre-tax and Roth, which you contribute to after taxes.   Each one has its advantages and disadvantages, however since the money I had in the 401Ks and TSP were pre-tax money, it made sense to keep that money pre tax, so I wouldn’t have a hefty tax bill on it.

Once the funds were deposited into my new Traditional IRA, I began to customize my stakes, mostly buying 10 shares of different strong, dividend paying stocks.   This let me have full control of how I invested my retirement fund.   If you are not have that much experience in investing this way, you can follow my Daily Trades Blog, where I share all my trades on both the Long Term retirement arena but also my short term bets in my brokerage account.   You can also choose Mutual Funds that have different targets, such as Targeted Retirement Funds, which will slowly move your risk out of high-risk assets into lower risk assets as you get closer to retirement age.   Another method is also looking into ETF’s.   ETF’s or Exchange Traded Funds allow you to purchase Mutual Fund like products over the counter.   I will go over these products in a different article.

There are many strategies to investing, but in my Traditional IRA, I take a growth approach with some safer options.   These are stocks that pay dividends, which means they pay you even if they aren’t moving much.   My initial investments are in 10 share increments.   When they double in value, I sell half the shares, keep the money in the IRA Cash account and save it when either I have a stock that has gone down 10% (in which case under most situations I buy an additional share) or I find a new dividend paying stock that looks attractive and I want to add to my portfolio.   When the shares double and I’ve sold half, that means my initial investment is out of the stock and I’m riding on profits.   I continue to sell half every time that the investment increases another 100%.  
​
It is important to find an account that does not have monthly fees or commissioned trades, as many brokerage firms now offer commission free trades and no monthly fees.   This will allow you to make your moves and maintain your account at practically no cost to you.   Remember the point of going this route isn’t just to take control of your retirement, but also to reduce or eliminate the fees that can come along with accounts.

---