Hundreds of thousands of Americans enter a job for the first time every year, but also many hundreds of thousands go into retirement with every year that goes by, with both tied to the 401 (k) plans, either because they’ll need to start saving soon alongside their employers or because they’re about to enjoy the fruit of the hard work throughout those years.
There’s two main ways that workers save on their 401 (k), the traditional which gives Americans a tax break that helps them save in the immediate future, while a Roth 401 (k) gets them free income during retirement, with many having both set up.
What happens to my 401 (k) if I quit my job?
Those who quit their job, are laid off or even fired by their employers oftenly wonder what happens to their 401 (k) contributions and money invested in it, well if that’s your case or someone you know, this are the steps that must be followed.
When an employee doesn’t have a job anymore, their past 401 (k) can’t still be used as it was linked and set up by the previous employer, but the money that’s already invested in it will continue to be from the employee.
The employer could ask for the individual to withdraw the money as they’ll be closing the account so they can no longer have to pay for it.
With some employers opting to move the employee’s money to an IRA, which is also known as an involuntary cashout, but that’s only limited to those who contributed only between $1,000 and $5,000 during their time employed.
While typically those who had contributed less than $1,000, receive a check through the mail for the total amount of their contributions.
Read More: What happens to your 401(k) when you leave a job?