Don't cash out that 401(k) when you change jobs! on clarkhoward.com

Clark is very impressed with young people who open a 401(k) when they first start a job. Years ago, few people even knew what a 401(k) was!

But a new study from Fidelity reveals that just under half of all 20somethings and 30somethings cash out their 401(k) accounts when they change jobs.

That's like snatching defeat from the jaws of victory.

As regular listeners know, retirement savings need time to grow. That idea is well illustrated in Clark's retirement chart.

Know that the money you cash out of your 401(k) gets hit with penalties of about 40%. So Clark's special challenge to younger people is for them not to cash out. Instead, think about rolling your money over to your new employer's 401(k) plan.

What others are saying

401K vs. IRA
I am 60 years old. I never opened a IRA but I have 3 401ks. Should I roll everything over to a 401K? I'm confused. My co. doesn't have matching funds. I am looking for a tax break.
By MAK @ 05/04/09 12:23:08 PMreport abuse
401K
Hi Clark

I listen to you all the time. I have $45K in a 401 with my previous employer. I am coming up to a year with my current employer. I would rather roll my 401k into an IRA or something like that, apposed to transferring to my current employer What do you recommend?
By Ed McGrath @ 04/23/09 11:00:51 AMreport abuse
401k's
I have 2 401k's. John Hancock and Prudential...At this point, are they safe or should I go to a bank for an IRA
By Anne Quigano @ 04/10/09 10:26:59 AMreport abuse
Letting 401k stay with old employer plan
Hi Clark and staff. I've read a lot about rolling over 401k's. Here is my question. I have a 401k with my old employer who is with with fedility. Is it safe to leave my 401k with my old employer and contribute my own money into that 401k account? What about any fees associated with leaving it with the old employer 401k plan and making my own contributions? You can contact me on my cell at 904-525-2632
By Sean Perryman @ 03/13/09 09:17:36 PMreport abuse
401k
I am a retired 63 year old, I have $50,000.+ in my 401. with Wells Fargo. My question is the way banks are going is my 401k safe or should I roll it into something else? I want it to be accesable for when I need extra cash.
By Diana B @ 02/22/09 01:16:37 PMreport abuse
Where to transfer an old 401K
Loosing so much money. What can I do with my old 401K. About 30K left to invest.
By C .S . email l_vallentour@yahoo.com @ 11/12/08 10:58:46 AMreport abuse
That's me!
I am one of the 20-somethings that made the mistake of cashing out my 401k when I moved out of state. I had only been with the previous company for under a year and I had not found a new job yet. So I cashed out the $600 401k and only got about $300. I wish I had dropped it into a Roth instead of spending it on moving expenses. Fortunately, I finally found a job I like and have opened up a 401k again. I am only putting in 1% of income into it, but that is more than nothing.
By Leah Turner @ 10/27/08 10:30:35 AMreport abuse
Company Buyout!
What do you suggest the people at Anheuser-Busch do with the money that they will be getting for the stock they held when the comany finalizes sell to InBev???
Some individuals will have very large sums of money and it is not clear as to yet if there will be a 401k plan to roll money over into.
By Jim G @ 07/14/08 08:02:04 PMreport abuse
Moving 401(k) when leaving jobs
I think Clark should offer some more subtle advice (and perhaps he has, but there is no station in St Louis that can listen to the broadcast on so only get it haphazardly) on this subject. Never cash out of course, but, often it is better to roll the money out of the employer plan to Vanguard (or other low cost provider). While the choices of investments for the employer plans have gotten better, they still do not match the universe of funds that are offered directly.

Also, since so many employer plans are NOT with a low cost provider, Vanguard offers a nice way to cut your costs.
By Jay Kirschbaum @ 07/13/08 12:34:21 PMreport abuse

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Jul 11, 2008 -- Don't cash out that 401(k) when you change jobs!

What others are saying