Far too many people are not properly prepared for retirement from a financial perspective, and many find that they are not in a position to retire when they reach their full retirement age as defined by the Social Security Administration.
To avoid this fate you must be proactive about building a retirement nest egg. One way of doing this, at least in part, is by contributing into the 401(k) plan that is offered at your place of employment.
Your 401(k) account balance accumulates while you are working and your contributions are made with pretax earnings, and this is an advantage. And, in many cases the employer will match the contributions of employees up to a certain limit. Hartford financial planning lawyers will tell you that failing to take advantage of this by not contributing into the 401(k) is an instance of leaving free money on the table.
A question does arise about what happens to your 401(k) plan after you suffer a layoff. The answer is that you have a few options. You could potentially do nothing and leave the money in the 401(k) account but you may have to pay administrative costs that were previously paid by the employer.
Another option would be to cash out the account. If you are under 59 1/2 years old you would have to pay a 20% tax as well as a 10% early withdrawal penalty should you go this route.
The third choice would be to roll it over into a qualified individual retirement account. If you do a direct rollover this can be done without incurring any penalization.
Should you find yourself in need of answers regarding your 401(k) account and other retirement planning issues, the wise course of action is to reach out and obtain the advice of a licensed, Hartford retirement planning lawyer.
Nirenstein, Horowitz & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.