Web Wealth: Tips for managing 401(k) money after leaving a job

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Bankrate.com's "spend it or save it" calculator offers tips.

When you lose or leave a job, it's important to know what to do about any money that's stashed for you in a former employer's 401(k) retirement plan. There are lots of options.

Losing a job raises all sorts of questions in addition to immediate concerns for income. What becomes of the retirement money you and your former employer have put into your 401(k) account? Bankrate.com's Don Taylor notes some facts that may surprise you in a post titled, "I lost my job. What happens to my 401(k)?" For example, a former employer might still owe you matching funds, and those funds may not come your way until the end of the year. But it all depends on how the company's 401(k) plan is structured. If you're 55 or older when you lose the job, you can withdraw your 401(k) money "without owing the 10 percent penalty tax for early withdrawals," says Taylor. Or, he writes, you can avoid the penalty "by receiving payouts structured as an annuity."

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Cashing out is probably the worst option for someone who's lost or left a job, says a post by Sonya Stinson, also at Bankrate.com. "You won't even get all of your money: The employer is required to withhold 20 percent for the IRS. If you don't put the money in a qualified retirement account within 60 days, it's taxed as ordinary income. Add on a state income tax, if one applies to you," Stinson writes. Leaving the money in a former employer's 401(k) plan could be the right thing to do if it's a good plan, although higher fees may apply, and moving on from the employer means you risk losing track of your money, says Stinson, who concludes, "The surest way to get control of your retirement funds without the financial drawbacks is to roll over your funds into an individual retirement account."

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Put some convincing numbers behind your decision with the "spend it or save it" calculator at Bankrate.com.

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Rollover options are described in a post at Finra.org, the website of the Financial Industry Regulatory Authority. For example, you could roll an old 401(k) balance into a new employer's 401(k) plan if it's a good one. Or your money can be transferred in several ways into an individual retirement account, or IRA. "To initiate the rollover, you complete the forms required by both the IRA provider you choose and your 401(k) plan administrator. The money is moved directly, either electronically or by check. No taxes are due on the assets you move, and any new earnings accumulate tax deferred," Finra says. You may also be able to roll over your money into a Roth IRA, in which earnings won't be taxed as you withdraw them in retirement. The catch, notes Finra, is that "you'll have to pay taxes on the rollover amount you convert."

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@ReidKan