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Asked 3/16/2009

I want to quit work when I have a baby next year. What should I do with my 401k?

I am 26 years old and currently have $25k in my 401k plan. I want to quit work next year (I make 70k and contribute 8%, my company matches up to 5%) and be a stay-at-home mom for a few years, maybe even 5, before I return to the work force again. I am not sure what the best option is for my 401k. I don't want to lose 5 years of saving, especially at a young age. I have heard of spousal 401k contributions, but not sure really how that works or what my options would be? Any advice is appreciated! Thanks!

 
 
 
 
 
Answers

Answer 1/5 - Submitted 3/16/2009

My husband makes 100k a year and contributes the same as myself (13%). Not sure if that matters, but just to give you more details on our situation.

 
 

Answer 2/5 - Submitted 3/16/2009

For the balance you have... you can probably leave your 401 right where it is.. though neither you nor your spouse can contribute.... (payroll contributions only)
You can move it to an IRA at a bank or financial advisor...(you can contribute and withdraw as you wish)
The only way you would lose, and be penalized is if you take it out payable to you..(cash out)
Contact your administrator, but usually with over $5000 you can leave in the employer's plan.

 
 

Answer 3/5 - Submitted 3/16/2009

If you do not plan to return to this job, then you can either leave the money in place or roll over into an IRA. If you like this plan and how your money is placed, and feel that the fees are not too high, just leave the money there. It will stay there until you retire, and hopefully grow in value. There are plenty of places you could roll over this account. All the bigger brokerage houses would be happy to help you: Fidelity, Schwab, others.

 
 

Answer 4/5 - Submitted 3/16/2009

I am not sure I would be returning to the same company, so I suppose I could roll it over to an IRA. Do you know anything about the spousal 401k? Would that be separate from my current one? I just don't like the idea of not contributing to it at all...

 
 

Answer 5/5 - Submitted 3/17/2009

The 401(k) is a retirement plan, but you cannot contribute if you have no income. These plans are instituted by employers and are only available if you work for a company. The really good deals come when the employer matches part or all of your contribution. That is free money! IRAs do the same thing if no 401(k) is available; however, they are also limited to the amount of money you make and with a maximum total of $5000 per year. So, if you are not earning, you cannot contribute. The spousal 401(k) is a separate plan for your spouse, so since he is keeping his job, he can continue to contribute.

 
 
 
 
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