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What Happens to “Old” 401k’s?


"I stopped contributing to my 401k in Jan when I left my job and I have not moved it. Does it still invest with the existing balance or does it stop?"

This is a good question and one that many people probably have questions about.  What actually happens with your investments in your “old” employer’s 401k when you leave?  The short answer is in most cases nothing.  You will remain invested in the exact same investments that you were invested in when you left.  You will also not be having any more contributions going in from you since you won’t be working there anymore and your “old” employer isn’t going to be making contributions on your behalf anymore either.  Basically, the entire balance in this account will be dependent on how the investments perform.  Keep in mind that doesn’t mean you can’t change the investments at any time.  In fact, you should be changing the individual investment balances at least annually when you rebalance all your investments.

As far as should you move it, sometimes it makes great sense to leave it where it is and sometimes it makes sense to roll it over.

Some reasons to leave it where it is

  • Currently or in the future may be doing a “back door” Roth IRA
  • Transaction costs associated with rebalancing are usually $0
  • May have access to institutional share classes with lower expenses that you otherwise wouldn’t have access

Some reasons to roll it over

  • No good investment options within the plan that fit your investment strategy
  • If the plan increases the fees because you no longer work there
  • Have no choice because the plan is making you