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Finding the Best Fit

Here are the three choices for handling your 401(k) money when you leave a job. Of course, you can liquidate the account, but the taxes and penalty are so prohibitive that it is strongly discouraged.

STAY WITH ORIGINAL 401(K)

--If you have an account balance of more than $3,500 and your new plan doesn't accept rollovers

--If the new plan has limited investment and distribution options, poor investor services, and no loan or hardship withdrawal provisions

--If you've taken a loan against the plan and you can continue paying it off

ROLL OVER INTO NEW EMPLOYER'S 401(K)

--If it has superior investment options and flexibility to move money among funds

--If it offers a loan feature and hardship withdrawal policy

--If the plan administrator provides good investor service and timely account statements

TRANSFER MONEY TO AN IRA

--If you have an account balance over $10,000 (usually the minimum needed to qualify for no-fee IRAs at discount brokerages) and want a broader selection of investments

--If the new plan doesn't allow rollovers

--If both the new and old plans offer limited investment selection, access to funds, or account status reports

DATA: JULIE JASON, AUTHOR OF YOU & YOUR 401(K)


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Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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