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Hey everyone,

I have a 401k at my job, but I plan on leaving (because I'm relocating) in March. Is there a point in contributing to it? It won't be over the $5,000 threshold by the time I leave so I will have to withdraw it and pay taxes in March right? Also, will my employer take back their matching contribution anyway? I'm trying to decide whether I should contribute now or just leave it alone until my new job in March.

Thanks!
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>> I have a 401k at my job, but I plan on leaving (because I'm relocating) in March. Is there a point in contributing to it? It won't be over the $5,000 threshold by the time I leave so I will have to withdraw it and pay taxes in March right? Also, will my employer take back their matching contribution anyway? I'm trying to decide whether I should contribute now or just leave it alone until my new job in March. <<

Your employer may require you to move it out of their plan being under $5000, but you wouldn't have to eat taxes and penalties on it. What you need to do is rollover this balance to either your new employer's 401K or to a rollover IRA. The critical thing is to not accept a check from your old plan made payable to you -- it needs to be made out to the destination plan's custodian "for benefit of" you. That's the key phrase: "for benefit of" (or FBO for short).

As for the company match and whether they'd take it back, it depends on your employer plan's vesting schedule (which probably depends on whether you have enough years of service to be fully vested in the company match). This is something you'd need to ask your employer, though that could be dicey if they don't know you are planning to leave and don't want to tip your hand yet.

My guess is that if your total balance is under $5000 you probably have less than 3-5 years of service there, in which case you would lose most or all of the employer match in most plans.

#29
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As a follow-up, if you are partially or fully vested in your current employer's matching contributions, then by all means keep contributing and collect that free money. If you can afford the reduction in take-homepay, you might even consider increasing the amount of your contribution in 2011 until your last day so you can maximize the amount of matching contribution you can take with you.

If you know your matching contributions are going to be forfeited and you either need the cash to support your relocation or you feel you have better investment opportunities elsewhere, then you can stop your contributions now and instead fund your Roth IRA. But you shouldn't just stop your contributions and not have another purpose for the money.

Fuskie
Who expects you can find out about the vesting information from the plan administrator rather than the company benefits department, but even if you contact benefits, you should be able to get your answer without tipping your career change hat...
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Plus keep in mind that conribution limits are much higher for your 401K than for your IRA. The 401K is an opportunity to put more funds into your retirement accounts if you can afford it. So continue those contributions and max the plan if you can.
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True to that!
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