The Question
Old/Small 401k: Transfer or Close?Old/Small 401k: Transfer or Close?
I have an old 401k that was automatically enrolled in a Roth Ira. Its only about 1500. I get a statement every year but it accrues only 2-5 dollars a year. The bank that holds it doesn’t have any locations in my state. I have found myself in financial hardships at time. Should I attempt to transfer this to my current bank or 401k with my new company or should I attempt to close it out and take the tax hit?
That’s a good question, and it’s smart to take stock of old accounts like this.
If the account was originally set up as part of a 401(k) plan and later moved into what appears to be a Roth IRA, there are a few things to consider—even if you’re not 100% sure what kind of account it is. The type of account (Roth IRA vs. traditional IRA vs. leftover 401(k)) will impact taxes, penalties, and transfer options.
Since it’s a small balance and barely growing, consolidating it might make sense just to simplify your finances. Some people choose to transfer these accounts to a provider they already use (like a bank or investment firm) so it’s easier to track and potentially grow more effectively.
Others cash out small balances—especially if they’re in a tough financial spot—but that could come with taxes or penalties depending on the account type and your age.
The best first step is usually to call the financial institution and ask what kind of account it is and what your options are. Once you know that, it’s easier to compare whether transferring, cashing out, or leaving it alone makes the most sense for your situation.
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