😱 Never do this with an old retirement plan
Plus, a Q&A about the future of Social Security and whether you should be worried.
Featured Artist: Althea Crome, Micro Knitter
Here’s what’s in today’s newsletter:
📝 Main topics: How to handle a retirement account with an ex-employer — and whether you should be worried about the Social Security program
✅ Things To Do: Take 60 seconds to complete a brief survey—thank you!
📚 What I’m Enjoying: A recommended protein source, book, and natural skincare
🗞 In the News: Stay up to date on personal finance news
📩 ICYMI: Recent newsletters you shouldn’t miss
🎙 Recent podcasts: Dig into loads of topics in the Money Girl archive (828+)
Hi, Friend -
If your workplace benefits include a retirement account, like a 401(k), 403(b), or 457 plan, you may wonder what happens to it if you leave your job. How you handle an old retirement plan is a critical decision that affects your financial future.
This week on Money Girl episode 827, 5 Options to Manage Your 401(k) After Leaving a Job, I cover the following options in detail:
1. Keep your retirement plan with an ex-employer.
Most retirement plans allow you to keep money in the account after you're no longer employed. However, you must maintain a minimum balance, such as more than $5,000.
2. Rollover your retirement funds to a new or existing IRA.
Doing an IRA rollover is generally the best option for a retirement plan with an old employer–if you do it correctly!
3. Rollover your retirement funds to a new workplace plan.
Most 401(k)s and 403(b)s allow a rollover from your old employer's plan once you're eligible to participate in the new plan. So, check with your benefits administrator about what's possible.
4. Rollover your retirement funds to a self-employed plan.
If you have self-employment income from a part- or full-time side gig or business, you can move funds into a retirement plan for the self-employed, such as a solo 401(k) or SEP-IRA.
5. Cash out your retirement funds.
Cashing out a retirement plan after leaving a job is the easiest but worst option! 😱
QUESTION from Laura in Oregon, podcast listener since 2012:
“I turn 62 this year and am paying more attention than ever to Social Security and am concerned about its solvency. My question concerns the Social Security tax, which gets applied to earnings up to $168,600. Would it be reasonable for the tax to also get applied to other types of income, like passive income and capital gains?”
ANSWER:
Even if you’re nowhere near retirement age, getting familiar with Social Security is smart because it should play a significant role in your financial planning.
I answer Laura’s question by reviewing how the Social Security retirement benefit works and what’s likely to happen to the program on Money Girl 828, Should I be worried about Social Security? You can listen to the audio or read the show transcript.
Also, a big thanks to “Young and dumb” for this review of the show on Apple Podcasts:
Thanks to everyone who already completed this brief survey — your feedback is super important to me!
If you haven’t submitted your survey, I promise it will take less than 60 seconds with 6 short questions. I’d really appreciate you letting me know what’s resonating with you most.
🥩 Force of Nature is a new protein source I’ve found that uses regenerative agriculture with “…no tilling, no synthetic chemicals, no hormones or antibiotics, and beautiful, wide-open spaces.” The result is great-tasting, nutrient-rich food that’s better for the planet.
📘 Table for Two is bestselling author Amor Towles' newest book. It's a collection of short fiction, six stories based in New York, and a novella set in Golden Age Hollywood. I'm about halfway through and absolutely love the sophistication and humor he expertly brings to each story.
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🗞 Inflation cooled to 3.4% in April (after heating 0.3% in March), giving some hope that interest rate cuts are possible before the end of the year.
🗞 One in five Americans over 50 have nothing saved for retirement, and 61% fear running out of money, according to AARP data.
🗞 The Dow hit a record high on Friday, closing above 40,000 for the first time despite inflation and uncertainty about future interest rate cuts.
🗞 Student loan interest rates are going up on July 1 from 5.5% to 6.53% for the 2024 to 2025 school year. Graduate loans will be 8.08%, up from 7.05%, and PLUS loans for grad students and parents of undergrads will rise to 9.08% from 8.05%.
🎧 828: Should I be worried about Social Security?
🎧 827: 5 options to manage your 401(k) after leaving a job
🎧 826: What tax do I owe on my home sale?
🎧 825: Debunking 10 costly investing misconceptions
🎧 824: 6 rules for contributing to an IRA and a 401(k)
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