I got a question from a reader the other day that is a pretty common one (what to do with your old 401k), so I decided to answer it as a blog post today. Here is her question: Hi Bob, I have a 401k with my old job and my new job does not offer a 401k option (or else I would just roll my 401k over). What should I do with this 401k? Leave it alone? Roll it over into a Roth IRA? (What are the tax implications if I were to do this?) Roll it over into some other entity that I am not aware of? I don’t know if a little background info matters but…, I started this 401k when I was 20, stopped depositing money into it when I quit my job at 30 (I quit to stay home with my baby for a year) and now I’m back to work but just part time. So what should I do? What I did with my old 401k I will tell you what I did. I rolled my old 401k into a Traditional IRA at Zecco and then converted it to a Roth IRA . And the primary reason I did so is because when the money is in an IRA (roth or traditional) you have about a million investment options vs. a 401k that often only has 10-20 different options. As if that weren’t enough, 401k fees are often a lot higher than IRA fees, which will cut a big chunk out of your earnings over 30 years. You can roll it into a Traditional IRA and won’t have to really do anything, but if you roll it into a roth you will have to pay taxes on that money now. The positive side of this is that money will grow for the next 30 years and then you will be able to take it all out and NOT pay any taxes at that point. This is why I love the ROTH so much. If you left it in a 401k or rolled it into a Traditional IRA you would have to pay taxes on that full amount until you withdraw the funds in 30 years. And you can imagine what the tax bill might look like on a $1 million dollar nest egg. Get more information If you are looking for more information you can learn more about the benefits of rolling over or find a Christian Financial Planner in your area. Anyone else have suggestions for this fellow reader? Please share in the comments! A few other great reads from around the web: How to decide how much fun money you should have in your marriage. 8 Ways to buy organic produce and meat on a budget . An update on the recent changes that Perkstreet made to their rewards . 22 ways to get a discount on anything you might ever want to buy. A look at whether or not it is always bad to talk about money outside of the family. How to set up fraud alerts with the credit bureaus. 5 simple ways to save time and money . A bunch of good Q&As about the Roth IRA . And these are some carnivals that CPF has been featured in lately: Personal Finance , Totally Money , Wealth , Financial Camaraderie , Wealth , Totally Money , Managing PF , Best of Money , Self-Directed Investing , Tax , Passive Investing , Frugality . Related Articles: My Traditional IRA Conversion To A Roth IRA What is a Roth 401(k)? 6 benefits you might care about… My Rollover From 401k to IRA at Zecco Which IRA Should You Invest In? Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter .
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Reader Question: What should I do with my old 401k? | Roundup