[jiwonstr]

Hi all,

I'm currently employed with a large consulting firm. I want to enroll in my firm's 401(k) plan, but want to make sure of one thing.

If I enroll now (through ML) and change my employer in two years, what happens to my 401(k)? Does it follow me? Can I continue my 401(k) with the new company?

I know every company have different policy for the 401(k) but I'm just not sure if I change my company, I don't want to lose my 401(k) and start all over again.

Also, is it wise to invest in 401(k) even though your company don't match $1 for $1 now? I have to be seasoned few years to get $1 for $1 match.

Thanks!

[ebaines]

You will never "lose" your 401(k) plan, so don't worry about that. After you leave your current employer you will have several choices:

1. Leave the 401(k) plan with your former employer. Most plans allow former employees to maintain their plan, even though there are no more contributions being made to it after the employee leaves. There can be advantages to the employer in allowing you to do this - generally the more money under management the lower the fees from the administrator. However, there's also a cost involved in maintaining old accounts, so most require that if you don't have at least $5K in the plan you will have to close the account out when you leave the company.

2. Roll the plan into a new rollover IRA. The advantage of this is that you can probably find a better, lower cost, more diverse range of investments if you set up a rollover IRA than what your former employer offers. Any of the major investment firms can handle the transactions for you - check out Fidelity, Vanguard, T Rowe Price, Schwab, etc. If you do this, it is highly recommended that you do a direct rollover so as to avoid any risk of triggering taxes and penalties.

3. Roll the old 401(k) into the 401(k) at your new employer. Most plans alow this. The advantage is it consolodates your accounts and reduces paperwork for you. The disadvantage is your new employer's 401(k) may not offer the breadth and low cost that you can find with an IRA.

My recommendation is do nothing for a while. Let the old 401(k) sit where it is (unless you are required to close it out). Give yourself time to review your options and make a good long-term choice.

I also recommend that you enroll in your employer's 401(k) ASAP and start saving for your retirement even if your employer doesn't provide a match. Whatever you save is using pre-tax dollars, and earnings are tax-deferred. You probably won't find a better deal elsewhere. Also consider that you aren't going to get any younger, and the longer your savings have to compound before retirement the better off you will be.