What Do I Do With the 401(k) From My Old Job?

[Music] let's start off this hour with uh rochelle in fayetteville arkansas hi rochelle welcome to the ramsey show hello thank you for taking my call sure what's up um i have quit a job after 30 years and i have a 401k plan in it and i do not know what to do with that money i have to take it out and i'm not in retiring age or anything like that and i need to know what to do with it okay good how much you got in there 85 000. well this is pretty important then yeah okay okay so there's a couple of rules that i want everyone to learn about investing number one you do not put money in things you do not understand just because i understand them or christie understands them that doesn't make it okay you've gotta understand it and um so once you do and it's not that difficult uh you're not not like you have to go get a degree in brain surgery or something okay you'll be all right but um keep it simple uh and and so the second rule is is that in order to understand it the type of financial person you need in your life needs to have the heart of a teacher yeah and one of the things that i think is important rochelle is as you have someone walk through this with you they will break it down they will have the heart of a teacher so they'll explain things step by step you can ask lots of questions and they'll show you what to do next i'm not an expert on investing i have an investment professional that i sit down with so when i left my job before i started working here at ramsey solutions 12 years ago i sat down with an investment professional to talk about retirement where it needs to go and that type of thing and that's what they're there for and we have endorsed local providers that help you do that that show you exactly what to do next yeah our smart vester pros you just click on smart vester at ramsey solutions and you'll find someone in your area with the heart of a teacher now here's what they're going to tell you to do and let's walk through it a little bit okay number one what i want you to do it's called an i it's called a rollover you're going to do a direct transfer rollover into an ira there'll be no taxes if you do it the correct way okay now the incorrect way would be tell your hr department to send you the check they have to withhold 20 percent so they're going to keep about 20 000 of the 85 back for taxes because they think you're withdrawing it and you're not withdrawing it and the government makes them hold 20 back so you're going to get a check for like 65 000 but you have to put 85 000 into an ira to avoid taxes and penalties so now you're up a creek because you're 20 grand short so you do not want them to cut the check to you does that make sense yes okay so the direct transfer rollover works like this you sit down you contact one of those smart investor pros you sit down with them you select the mutual funds that you want to put the money into and we always suggest four types growth growth and income aggressive growth and international you'll learn about those and you'll hear those again when you sit down with a smart investor pro they don't work for us but they do stuff the way we teach and one of those things they're going to do it with a teacher with you at the heart of a teacher now when you sit down with them you're gonna pick out say four mutual funds and you're gonna fill out the paperwork that says direct transfer on it and that paperwork's gonna be sent to your hr department they're gonna then send the money directly into those mutual funds there is nothing withheld on the money so the whole 85 000 will go over there where you tell it to go and there'll be zero taxes on it now you've got an investment pro in your corner to teach you and talk to you and answer questions at any time you are in control of the money where it's invested you can change it later if you want to everything is uh you know ready to go and it's completely in your control and again it's fairly simple but you just have to fill out the right paperwork and you gotta have somebody help you lay it all out does that all make sense in general yes sir it does okay so where were you working what kind of job did you have tyson's okay all right why are you going after 30 years yeah it did not work out where i was transferred to at another plant because i moved and it just it just not did not work out in that plant for me all right wow that's a long time to be a one with one company and now what are you going to do now i don't know i'm looking for a glove i'm not sure okay how old are you 58. okay great well you got lots of time to start fresh we call these uh encore careers you ever go to a a music show and uh when they finish they leave but then they come back out take a bow and go again that's what you're gonna do you're gonna come back out take a bow and go again okay yeah so if you want some information on career and that kind of thing check out our website ken coleman dot com it's all free and ken is our resident expert on well that taken about going again that's right trying to find something new getting clear on what this next stage and season is for you dave i have a question even as you're talking about this rollover when someone is leaving an old job or has left an old job how urgent from a timeline perspective is it that they rolled this over because i know people that just leave some of these retirement accounts with that old job and we've even had calls here on the show they're like i had this job you know 20 years ago i don't even know where it is and i can't find it how how urgent is it that someone do that well there's no regulation preventing you from doing it any time but from your advice so i would just go ahead and you know it's part of the transition that you go through i mean you're filling out all kinds of paperwork when you leave a job right you know and just make that be you got to go get your new insurance you got to go figure out what you're doing next you got all this and so i would just go ahead and make it part of that and because you might forget about it right or not be able to find it after a while like we've had those calls for yeah we've people forget what was going on i don't even remember how much was in there i just left and right 20 years later i'm trying to figure it out now see that's another reason you take it with you right you've got more options in the open market to pick from you've got more control and you've got someone that's got your back an investment pro in your corner when you do a direct transfer rollover so we always tell you always take it from your old job not to your new job but to an individual rollover every time you leave

Channel: Ramsey Everyday Millionaires

Views: 114,420

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Id: ltHNH_qw9H0

Length: 6min 53sec (413 seconds)

Published: Fri Sep 10 2021