How to Manage a 401k If Fired

The shock of being fired from your dream position may leave you wondering what your next step will be. It is important to keep a level head when you are fired in order to effectively manage your finances. You need to bring your 401k funds along with you to a new position to keep your long-range retirement plan in place.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Direct deposit form for new 401k
• Election form for old 401k
• Statement of investments in your 401k portfolio

1. Transfer 401k funds to your individual retirement account (IRA) if you are planning on immediate retirement or a long-term break. You must deposit 401k accounts received via check within 60 days of receipt to avoid income taxes. The alternative is to allow your 401k to lapse, greatly harming your ability to remain retired.
2. Deposit funds into a new 401k if you have a new job lined up immediately. You can manage your old retirement account effectively by filling out an election form to shift savings from one trustee to another.
3. Start a new career and 401k without tax burdens by utilizing a direct transfer between account trustees. You should use this option to avoid income taxes and keep money in the hands of trusted financial officials.
4. Receive your old 401k funds to manage your financial accounts properly after you are fired. Some professionals request a check in the amount of past 401k holdings because they want to physically see the funds before they make a transfer. These funds must be deposited within 60 days to avoid state and federal income taxes.
5. Complete all paperwork associated with your old 401k accounts and new retirement funds immediately after you are fired. The process of transferring funds can take weeks as trustees review your account along with the thousands of other accounts they manage.
6. Read through your 401k account information to determine when the valuation for each fund in your portfolio will take place. Account managers do not transfer money until they have applied returns and debits to your 401k account based on the performance of your fund. These valuation periods range from biweekly to quarterly reviews.
7. Exhibit patience as various investments within your 401k are paid out upon termination. Your 401k rollover or withdrawal may take longer if your portfolio includes longer-range investments such as government bonds, real estate and certificates of deposit (CDs).

Tips & Warnings

• Store your old 401k information with the tax information for that fiscal year to maintain accurate accounting. You need to file your yearly contributions and returns as part of your tax return to account fully for your income. You should maintain this archiving system for 5 years in case of an IRS audit.