What to do with the money in the 401(k) plan?

First of all, there is no legal limit to how many 401(k) Plans you can have at the same time, but employees can only put money into the 401(k) Plan account of the company you currently work for.

 There are generally four processing methods:

1. Open a new 401(k) Plan with a new company and rollover (rollover) the previous 401(k) Plan amount into the new account.
2. Go to the IRA (Individual Retirement Account) account. IRA and 401(k) Plan are both retirement plans. The next article of Giant Panda will introduce what IRA is in detail.
3. If the original company agrees, you can keep the account in the original company and open a new one after the new company (but the company will ask to close the account if it is less than $5,000)
4. Get all your money out, pay fines, pay taxes. This is obviously the most unwise choice.

When it comes to the plan to transfer money from the previous company to the new company, there is the employer retention we mentioned above, also known as the vesting period (waiting period). For example, if you have worked in company A for 2 years Time, the company helped you save the 401(k) Plan for 2 years, and then you switched to company B. At this time, can all the money you saved in company A for the past two years be transferred to company B?

First of all, your own employee contribution can definitely be transferred. However, according to the different plans of each company, some companies may have such a special provision in the 401(k) Plan policy, and you can only take 100% of the money that the company gives you the employee match after working for 5 years. Some companies do not have this limit, so whenever you resign, you can take all the employee match that the company gave you.

Answers to some frequently asked questions about 401(k) plans

That’s it for some of the most basic introductions to 401(k) Plans! The following editor summarizes some common questions and answers about the 401(k) Plan, hoping to help friends who have the same doubts~

Q1: I am an international student and I plan to work in the United States for 2-3 years and then return to China. I have no plans to immigrate. Do I need to save a 401(k) Plan in this situation?

An1: Giant Panda believes that this is a very common question. Regarding the answer to this question, Giant Panda’s suggestion is to analyze the specific situation of your income and the number of employees matching in the company, but there are some tips related to this. Can share it with you.

The first is that the money in the 401(k) Plan will follow you all your life, and it will never expire. You can put the money in the 401(k) Plan into an IRA, or invest in a fund portfolio, and wait until you After retirement, the money can be withdrawn.

Q2: Is there any risk in putting money into a 401(k) Plan?

An2: The answer is yes, as long as it is an investment, there will be risks. A sustained positive rate of return requires you to put in enough energy to manage it.

Q3: Is it good for the company to have a 401(k) plan for employees?

An3: It can help the company attract more talents and help the company retain good employees.

Q4: What is the difference between the 401(k) Plan in the United States and the pension in China?

An4: China’s pension basically depends on the government, while the 401k in the United States is completely market-based and has nothing to do with the government.

Q5: What if the employer goes bankrupt? Do you still have the money in your 401(k) plan?

An5: The Employee Retirement Income Security Act (ERISA) contains regulations to protect employees’ retirement income. To ensure your funds are safe even in the event of an employer accident, the Act requires all 401(k) Plan deposits to be held in a custodial account. The bill also clearly sets out requirements that employers must comply with, such as sending regular statements, ensuring easy access to accounts, and complying with relevant regulations to ensure fair participation in the program for all employees of the company. In addition, the bill requires employers to provide training materials for various investment options within the program. So even if the company goes bankrupt, the money in your 401(k) plan is still there.

Tax Panda’s original works cannot be reproduced without authorization. Tax Panda reserves the right of copyright and legal prosecution. The opinions expressed in all original articles of Tax Panda are for information sharing only and do not constitute any legal advice.

© Copyright Tax Panda 2019