Stumble upon an abandoned 401(k)? Here’s what to do with it

When it comes to saving for retirement, every bit counts. Yet some people, unbeknownst to them, leave a 401(k) behind when they change jobs.

Fortunately, the National Registry of Unclaimed Retirement Benefits lets you search for any misplaced retirement savings plans. You could also track them down by contacting HR at your former employer.

Did you stumble upon an abandoned 401(k)? That’s great! But now what do you do?

Here are your options:

Some companies let former employees maintain their work-sponsored 401(k)s. If you have this option, then you could keep your former employer plan right where it is until you’re ready to withdraw. This could be particularly appealing if your former employer’s 401(k) plan is better than your current employer’s plan. Just note that you can no longer contribute to the account, or, in most cases, borrow from it.

Keep in mind that some companies limit withdrawal options for former employees. For instance, you might only be allowed to withdraw the entire balance. Contact the company’s HR department to find out your plan’s specific withdrawal options.

Managing multiple 401(k) plans can be a real challenge. And, depending on the specifics of the plan, you might have to pay management fees. So make sure you’re up for the task before leaving an old 401(k) with a former employer.

Rollovers — transferring all assets from one retirement account to another — are common when people change jobs. You may consider rolling your old 401(k) over to your active 401(k), if the new plan allows it. Or, you could move the funds into an IRA.

Cashing out a “found” 401(k) is an option, albeit a costly one. First, any distribution from a 401(k) is treated as taxable income for the year. Second, a 10% early withdrawal penalty may be applied if you withdraw from your 401(k) before age 59 ½.

These costs are why it’s best to avoid this option unless you’re going through financial hardship and have no other viable options. Talk to a financial professional before cashing out a 401(k) to make sure it’s the right choice for your financial situation.

It’s important to track down any abandoned 401(k) accounts so every dollar you’ve contributed toward retirement is working for you. Finding these misplaced retirement savings plans and putting them to work could be the difference that makes your dream retirement a reality. With that in mind, do your homework to find the option that will best suit your strategy and expected retirement date.

Looking to roll over an abandoned 401(k)? Learn how an IRA could help you get the most out of your misplaced retirement savings.