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Current time:0:00Total duration:6:14

Video transcript

let's say that right now you are working for company a so I will call this job job a and a company a has a 401 K program so this is Company A's 401 K and you have been contributing to that 401 K program so this is your money sitting there in company A's company as 401 K program now let's say you've had a nice time at job a got a lot of good experience but Company B now comes along and you're excited about the opportunity that it's offering you so you leave Company A and you go to Company B so I'll just call this job job B job B right over here and let's say Company B also has a 401 K program if it didn't you should maybe question your decision all right so job B also has a 401 K program and so you have a couple of questions or you have one primary question you moved from job a to job B but what do you do with your money does your money move from 401 K a to 401 K B does it do something else and that's what the focus of this video is on and you have fundamentally four options one option is you could keep the money where it is even though you've left you don't have to take your money with you so one option is leave it in company A's 401 K program another option is you could roll it over into your new company's 401 K program so you could roll over it and you're not going to pay any fees or any taxes on that it's just transferring from one for work one from one 401 K to another your third option is you could put it in an IRA so let me make this in a I'm just in this light pick pink color so you could put it in an individual retirement account and then your fourth option is you could just take the money out so you could just take the money and put it in the bank and put it in the bank now let's think about each of these options and I always encourage you pause the video and think about it with yourself which one would you do well let's first think about this bank option because strangely enough this is what a lot of people do when they go from one job to another but we've already talked in multiple videos about well you know you shouldn't take money out of a retirement account unless you really need to one you're essentially taking money from your older self you're your younger self is kind of being a little bit selfish so that's one reason not to do it but also you're gonna pay a penalty so you're going to pay a penalty for withdrawing it before fifty nine and a half and of course you're also going to pay taxes on it so the taxes are no longer going to be deferred so once again it's your younger self being selfish relative to your older self and you're going to pay money on it so this is not a suggestive thing the only time that you should really think about doing this is if you're in a very very very desperate situation but changing jobs hopefully does not constitute a desperate situation so once again I can't say absolutely never do this but strongly strongly not recommended so now let's think about these other options where I'm doing some variation of keeping my money in a retirement account how do I think about it well one comparing one 401k to another 401k they might be different job A's for you know I could imagine one reason to keep it in job pays 401k and your existing 401k is maybe they are more flexible maybe they let you invest in the types of things that you invest while job B is a little less flexible or they don't let you invest in as many things so that could be a reason to keep it up here now why would you want to put it in an IRA well IRAs tend to be the most flexible you can invest in kind of a very broad no one no no kind of 401k program is restricting your investments so this is this is flexible this is the most well I guess you're putting it in the bank is the most flexible but you've paid money on it and I'm just sad you just you're taking money from your older self but IRA tends to be flexible so why would you put it in job E well one job B might have a better 401k program than job a so that would be an obvious thing and then the other thing and this is more of a psychological thing it's it's kind of just simpler to keep it in one place so one place I know you know personally for me you know you could try to optimize things put a little money here put a little money there but a lot of times simplicity rules the day you just have to just want to deal with one 401k program otherwise you're kind of having to keep track of all of these all of these different things you're afraid that you might forget about the money here or not might not manage it properly so this might just be the simplest thing to do hopefully you will contribute to your 401k program in job in job B and so if you just roll over that money then all your money is going to be in one 401k program so you might do that if your entire is you could do that once again taking the money out is an option but it's not recommended now the last thing you might you might say oh okay what's the difference between you know maybe I want to put all my money in one place in an IRA instead of a 401k we talked about this in other videos but the general the general notion is is that there there's there's slight differences in how you administer these things and in the flexibility and well definitely in the and how you invest it and also and how you could take it out IRA is they do allow some taking out without penalty up to ten thousand dollars if you're buying your first home or if you haven't owned the principal home in the last two years they allow some for for paying for college tuition while a 401 K depending on how it is is minute how it is administered they will allow you to take a loan out potentially from your 401 K money without paying a penalty but you have to be very careful whenever you do all of these things make sure you understand all the information correctly so anyway your choice congratulations on the new job but I definitely would not suggest just because you your your your leaving your your old job that somehow you say oh let me just take this money out because that's once again taking from your future self
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