What to Do with Your 401(k) If You Lose Your Job

When the average person finds a job with a full benefit package and good pay they usually hope to stay on until retirement. But life often intrudes on those plans. Things such as layoffs, necessary relocation or terminations happen. Major upheavals such as these are stressful enough without worrying about what to do with your 401K.

If you find yourself in this predicament you will probably be relieved to know that choices are fairly limited as to what you can do. The first thing step is to consult with the human resources department of your former employer and also with a financial advisor or accountant. However, if you feel confident enough, you can do the research on your own. Just make sure you are aware of deadlines that must be met concerning the future of your 401(k).

It is comforting to know, that as a protective measure, the Internal Revenue Service requires the administrator of all 401(k) plans to send an explanation of their options to former employees within 30 to 90 days of the deadline of their making a decision as to how they want to handle this asset. It is during the early stages of this time frame that you should be researching these options are having them researched. Your options will strongly depend on whether you already have a new job and whether your new employer offers a qualified retirement plan. Of course, it also depends a lot on your financial situation. If you are far from rich, the money in your 401(k) can be accessed to cover your living expenses, although you will be financially penalized if choose this option.