If You’ve Lost Your Job How Will You Handle Your 401k? 3 Tips to Help Create Your Unemployment 401k Plan

Jun 11, 2020, 11:50 AM | Updated: Jan 4, 2023, 2:44 pm

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401k plan - Teton Wealth GroupThis article about your Unemployment 401k plan after losing your job is sponsored by Teton Wealth Group. Teton Wealth Group is offering Utah’s Ultimate IRA Guide that you can download right HERE at no cost.

Everyone is working to bring the economy back as the financial crisis loosens up businesses around the country. If you’ve lost your job due to the closures, what are you going to do with your 401k? 401ks are great because your employer will match your contributions. And 401k’s are easy to manage since money is just pulled straight from your paycheck. But if you’ve lost your job, that paycheck might no longer be on its way. So you’re going to want to make a good 401k plan using the following steps:

1. Don’t Leave it with Your Current Employer

unemployment 401k

Photo: Getty Images

There are a few reasons why you shouldn’t leave your 401k with the current employer that holds it. First, you might pay higher fees now that you’re not an employee. And your choices are going to be limited because most 401k plans don’t offer very many investment options. 401ks are great for accumulating slowly and investing passively. You may end up frustrated by your lack of flexibility and options.

2. Thinking of an Unemployment 401k Hardship Withdraw? Here’s Why You Might Move Your 401k to a Traditional IRA

unemployment 401k hardship withdraw

Photo: Getty Images

Instead of taking all your money out of your retirement in an unemployment 401k hardship withdrawal, try looking into IRAs. Traditional IRAs provide many more options for the future of your 401k because with a Traditional IRA you can invest in any stocks, bonds, funds, and even real estate. Also, you have more control over your fees.

Moving to an IRA won’t trigger any tax penalties either. And because IRAs and 401ks have the same tax rules, you pay income tax on the money when you spend it in retirement. You get the same tax benefit contributing to an IRA as you do a 401k. Like a 401k, the money you put into an IRA is deducted from your income.

3. Convert Your 401k Money to a Roth IRA

Photo: Getty Images

If your income is lower this year, the other option you might want to consider is moving your 401k money to a Roth IRA instead of a Traditional IRA. With a Roth IRA, you can pay the taxes on it at your lower-income level then reinvest the money in a Roth IRA for the future with the expectation of it growing exponentially. And best of all, the growth in a Roth IRA is all tax-free.

Make a 401k Plan Without an Unemployment 401k Hardship Withdraw

Photo: Getty Images

If you choose to convert your 401k into an IRA, you can also take advantage of third-party expertise. An outside advisor won’t be able to help very well with a 401k. But if you find an advisor you really like, they can help you with an IRA. Teton Wealth Group is a trusted advisor who is offering Utah’s Ultimate IRA Guide that can help you to simplify the process. You can download that guide right HERE.

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If You’ve Lost Your Job How Will You Handle Your 401k? 3 Tips to Help Create Your Unemployment 401k Plan