Few people these days work for the same organization their entire lives. People may need to change jobs for varied reasons that include better career prospects, better salary and perks, convenience, a shift to a new city or country — just about anything can cause a job shift. In these situations, an individual is required to roll over 401K money from the previous employer’s set account to a new one. In these circumstances an individual is advised to roll over the money into an individual 401K account.
Another alternative is to roll over the 401K money from the previous employer’s account to the new one. The accounts department of the company generally manages this. An advantage is that the accounting staff takes care of all the paperwork, which could be tedious for one who does not understand the formalities required.
If you do not have a substantial rollover plan then your previous employer can send you the amount that should to be invested in a tax-deferred scheme to avoid being taxed. However, if it is not rolled over into a new account within the stipulated sixty-day period, then the amount will be taxed.
Ideally, if one continues to work for the same company, it is advisable to roll over 401K money into an individual account. This is because one can never say when a crisis might befall the company, or a corrupt boss decides to exploit employees by embezzling their 401K money. Also, if the company is taken over or merges, then the newly formed company can wash their hands of the 401K responsibilities.
Spending some time each month in checking your accounts and balance accumulation in the 401K plan will safeguard against exploitation.