It is now more common these days for employees to work for different employers over the course of their careers. With the work environment becoming more fluid as companies get acquired, collapse or go bankrupt, job hopping has become the norm for many individuals.
If you have worked for various companies since you were 21 years old, you may have forgotten about 401k contributions you have made in your employers’ plans. In many cases, you most likely just left your job with the things you had in your desk, not realizing that you left something more substantial. However, if you signed up for each of your employer’s 401k plans, there’s a very big chance that your contributions are still there and already growing. You can just imagine the amount of your contributions put together if you worked for four different employers in the past and left them there when you went to work for another firm. These can help secure your retirement.
Thus, it’s important that you start remembering if you still have 401k contributions from your previous employers and get them under your own individual retirement account or IRA. Here are the steps on how you can do that:
1. Write down the names of the previous companies you worked for since you turned 21 years old.
Twenty-one years old is the determining age because most plans don’t allow employees who are less than this age to enroll in a plan. Retrieve the phone numbers of these companies since you are going to need to call them up regarding your 401k contributions. Then, try to recall if you were already taken out of the retirement plan by an employer. If you were, you should have received a check from that employer. If you haven’t, chances are your contributions are still in the employer’s plan.
2. Get in touch with each of these companies to verify if you still have a 401k balance with them.
Call each of your previous employers. Talk to the human resources department to determine if you still have a 401k balance in the firm. Even if you believed that an employer already sent you a check years before for the balance but you can’t find proof that they did in your records, it’s still worth your time to call up human resources to determine if indeed there is no more balance held under your name under their 401k plan.
3. Get the statements supporting the 401k contributions you have made under the plan.
If the human resources department confirms that you still have a balance, ask how you can get the statement for it. The firm should point you to the company that handles their 401k. Have your Social Security number and personal data, such as your date of birth ready because the 401k manager will ask this of you before releasing the statement that contains your 401k balance.
Once you’ve gathered all statements from your previous employers, you’ll find out that the total of all your accounts is actually substantial, sometimes worth a few years of your present earnings.
4. If you haven’t opened an Individual Retirement Account or IRA yet, do so now.
Go to a stock broker, bank or other financial institution that offers IRAs and set up one. Opening an account is as easy as filling up a few forms and providing the required funds.
5. Make the transfer.
Once you’ve already set up your IRAs, you can start the transfer process. The brokerage will ask you to provide information about the 401k accounts and can take care of the rest of the transfer process for you. The data the broker needs is usually found on the statements you had previously obtained from your former employers’ 401k fund managers.
6. Try to make the best investment choices.
Now that your previous 401k balances are already in your IRA, you need to strive to make the wisest investment decisions so your nest egg grows optimally. A general rule when it comes to investing is to never put all your eggs in a single basket. If you have limited funds, mutual funds are the best way to get the diversified portfolio you need at lesser cost. Study the options available for you and invest wisely.
7. Make regular contributions to your IRA.
Just because you have already transferred your old 401k balances to your IRA doesn’t mean that you should stop there. Continue making regular contributions to your IRA, going for the maximum contributions allowed in a year as much as possible.
With your old 401k contributions already taken care of and rolled to your IRA, let us now focus on what you should do to get the most of your current 401k plan. Remember that your 401k is going to fund a good portion of your retirement so it’s important that you make the most out of it. Here are ways for you to do that:
1. If there’s a minimum contribution required by your employer before the company matches the employees’ contribution then by all means meet it.
Your employer’s contribution is free money that can substantially increase your retirement funds. It would be foolish for you to pass up this opportunity.
2. Make the maximum contributions if you can.
Let’s say you retire at 60 years old. How long do you expect to live after that? Before the advent of sophisticated medical technologies that can actually prolong lives, people lived at the most 15 years after they retired. Now, however, it’s possible to live to a ripe old age of 100. That means if you retire at 60 years old, you will have 40 more years to live. Only by maximizing your contributions to your 401k will you be able to have the money to fund it.
3. Start saving today.
If you haven’t signed up for your employer’s plan today, you should do so now. The earlier you save, the more your money will grow. That means greater returns for your investment. The more you wait, the lesser traction your dollars will have.
4. Don’t miss contributions.
Whatever you do, be disciplined enough to make contributions to your 401k no matter the difficulties you encounter. You won’t ever have to miss contributions if you follow a budget, live within your means and have an emergency savings fund in place. As much as you possibly can, never touch your 401k contributions so that it grows unimpeded and your retirement is secured. In case you really need money for emergency purposes, exhaust other means of raising the funds you need first before you think about your 401k. If you really need to dip into your 401k, make sure you know the rules that govern repayments and if there are corresponding penalties.
5. Understand all you can about your 401k.
There are a lot of avenues for you to learn about your 401k. Your employer will most likely orient about this. You can also learn about how to maximize your 401k through online sources as well as books you can find in the library or bookstore.
Because of the myriad of investment options available to you in which to put your 401k, the investment choices can be confusing. You need to educate yourself about these options. If your situation is a little complicated, you may want to talk to a financial expert who will help you come up with the best possible arrangement for your retirement funds.
The government knows that funding retirement is not going to be easy. That is why it has given all possible tax breaks for those who contribute to their employers’ 401k plans. You should take this as a cue to not take your 401k contributions for granted. If you have old 401k balances in your previous employer’s plan, make sure that you transfer it to your IRA.
You should contribute to your current 401k plan religiously. As much as you can, don’t touch the funds in this plan to meet financial difficulties you may be encountering. Don’t stop contributing so that you can use the funds intended for your 401k to meet a need. Some postpone contributions for a month or even a quarter, promising to double their contributions when the start contributing again. Most of the time, this pledge is not fulfilled. In the end, they will just continue to make the regular contributions but have already missed out on the earnings they would otherwise have gained if they did not miss their contributions.
Planning for retirement is vital. The saying “those who fail to plan, plan to fail” holds true when it comes to retirement. You need to see to it that you will still be independent in your golden years even when you will not be able to work. This can only be possible if you have the money to finance it. To get this money together, you need to start saving today.
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