While you can’t control the health of your company, there are some things you can do to protect your investments if you take part in a 401K plan.
While 401K funds are generally protected in something like a company bankruptcy, they may be unavailable for months – or longer – which can leave them vulnerable to the markets and unreachable to individuals for a period of time.
Paula Albertson, CEO of Albertson Financial Group, says one way to protect yourself is to move your funds if you move jobs – not leaving your money at an employer you’re no longer connected to – and also avoid consolidating it all in your new employer’s 401K plan.
If you move all the money into your new 401K, “I call that a mistake because you’ve lost control,” she said.
As you age, you may also have opportunities to withdraw some money from a 401K plan and roll it into another plan. For many plans you can do that at age 59 1/2 , she said.
If you have concerns about the health of the company where you’re working, you might want to consider halting your contribution to that 401K and instead directing regular contributions to a self-directed IRA, she said. Even though you may lose company matching dollars (if your employer offers them), you may be able to find other financial incentives and retain control.
In addition, Albertson recommends creating an emergency fund outside of your 401K that can be accessed in the event of something like a job loss.
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