Just Left Your Job? Don't Make These Costly Mistakes With Your Old 401k.
Content Idea: What to Do (and Not Do) with Your 401k When You Leave Your Job
Core User Problem Identified: When leaving a job, especially early in their careers, many people are confused about what to do with their 401k. They often think they need to move it to their personal bank account, don't realize the hefty tax penalties for cashing out, and are unsure about the concept of rolling over to an IRA or a new employer's plan. This confusion can lead to inaction or costly mistakes.
Target Audience:
- Young professionals (20s-30s) leaving their first or second job.
- Anyone changing employers, regardless of age.
- Individuals who are new to investing or feel financially uneducated.
- People with small 401k balances (e.g., under $5,000) who might face a forced cash-out from their old plan.
Sample Content Plan: Blog Post / Explainer Video
Title: I Quit My Job. What Should I Do With My 401k? (The Do's and Don'ts)
Hook: So, you’re moving on to a new opportunity—congratulations! But now you have a letter about your old 401k and no idea what to do. Don’t panic. And whatever you do, do not move it to your checking account. Here’s a simple guide to making the right choice.
Part 1: The #1 Mistake to Avoid: Cashing Out
- Explain the Problem: Your first instinct might be to "get your money" by cashing out the 401k or moving it to your bank.
- Explain the Consequences (The "Why NOT"):
- Taxes: The entire amount is treated as income and taxed.
- Penalties: If you're under 59.5, you'll pay an additional 10% early withdrawal penalty.
- Lost Growth: You lose decades of potential tax-deferred compound growth. A simple chart showing how $5,000 can grow to $50,000+ over 30 years is very effective here.
- Result: Show a simple calculation: "$1,100 cashed out could mean you only get about $700 after taxes and penalties."
Part 2: Your Four Real Options, Explained Simply
- Option 1: Leave It Alone.
- Who it's for: If you like your old plan's investment options and the fees are low.
- Warning: Not an option for small balances (often under $5,000), as the provider may force you out.
- Option 2: Roll it Over to Your New Job's 401k.
- Who it's for: People who want to consolidate all their retirement money in one place.
- How it works: Your new HR or plan provider can help with the paperwork.
- Option 3 (Often the Best Choice): Roll it Over to an IRA.
- What is an IRA? Explain it simply: An Individual Retirement Account that you control, not an employer.
- Why it's great: More investment choices, often lower fees, and total control.
- Address the Fear: "This sounds complicated, but it's not. It's a 3-step process."
- Option 4: The Forced Cash-Out (What happens if you do nothing).
- Explain that if your balance is low, they might mail you a check.
- CRITICAL ACTION: You have 60 days to deposit that check into a rollover IRA to avoid all the taxes and penalties mentioned in Part 1.
Part 3: How to Roll Over Your 401k to an IRA in 3 Simple Steps
- Step 1: Choose a Brokerage and Open an IRA.
- Recommend the "big three" low-cost providers: Fidelity, Vanguard, or Schwab. Opening an account is free and takes about 15 minutes online.
- Step 2: Contact Your Old 401k Provider.
- Tell them, "I want to do a direct rollover to my new IRA." They will know exactly what this means.
- Step 3: Follow Their Instructions.
- They will either send the money directly to your new IRA or send you a check made out to the new brokerage (e.g., "Fidelity FBO [Your Name]"). You then send this check to your new brokerage. It is NOT a cash-out.
Conclusion & Call to Action: "Don't let confusion cost you thousands of dollars. Deciding what to do with your 401k when you change jobs is one of the most important financial decisions you'll make. By avoiding the cash-out trap and choosing a rollover, you're setting your future self up for success. Have questions? The customer service teams at Fidelity, Vanguard, and Schwab are there to help you for free—give them a call!"