How to Manage Your 401(k) While Abroad

​A 401(k) is a great retirement planning tool offered to many Americans. However, all of the excitement that comes with moving abroad can lead to oversight and confusion when deciding how to manage this tax-deferred account. This article explores some of your options:

Option 1: Cash Out 

Some people assume that living abroad means that cashing out and taking early distributions is necessary since they are no longer living in their home country. This is not the case and taking an early distribution is generally not advised unless there is an acute need for the cash. In most scenarios, taking an early withdrawal (before 59 ½ years of age) on a retirement account will lead to penalties that could outweigh the benefits of the structure in the first place. This is not always the case, read here about IRAs, and learn how penalty free withdrawals are possible. 

Option 2: Leave Money in Current 401(k)

401(k)s are at their best when you are consistently contributing to them. Most employers have a “matching” program. By contributing a portion of your paycheck to your 401(k), your company will “match” this contribution, typically up to 3% of your total paycheck. Free money! 
Once you cease contributions, the 401(k) structure becomes less attractive. While still providing certain tax benefits, it offers significantly less flexibility than other options. ​

Option 3: Transfer Funds to an IRA

Taking control of your old 401(k) is free and simple, and the payoff can be significant. 401(k) investment options are often limited to the mutual funds offered by the provider, and can be laden with hidden fees. On the other hand, IRAs have extensive investment options ranging from stocks and ETFs, to greater complexity such as options and futures. With added control of your account, you can choose an advisor with a reasonable fee structure, or save even more by self-managing your account.

Why You Might do a 401(k) Rollover

If you have an unmanaged retirement account and you think a rollover is right for you, please don’t hesitate to reach out. We would be happy to provide you with the facts, and help facilitate the process.
Don't have a 401(k)? There are various other ways to save money for retirement tax-free.  Schedule a meeting now to learn how you can grow your savings.

Source: www.goodfinancialcents.com/401k-rollover-to-ira/