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Published: Mar 02, 2020 6 min read
Alex Eben Meyer for Money

Welcome to Dollar Scholar, a personal finance newsletter written by a 27-year-old who’s still figuring it out: me.

Every week, I talk to experts about a money question I have, whether that’s “What if I don't have a 401(k)? or “How many credit cards do I need?” As I learn, I share simple ways to improve your financial life… and post cute dog photos.

This is (part of) the 31st issue. Check it out below, then subscribe to get future editions of Dollar Scholar every Wednesday.

Money got a new parent company last fall, and it meant a whole bunch of changes that freaked me out.

I got a new email address, julia.glum@money.com. I got a new desk, which I promptly decorated with a Spencer Pratt prayer candle and a half-eaten box of Thin Mints. I got a new office on the 25th floor with a killer view perfect for zoning out and pondering the universe.

The change that’s really tripping up me and my coworkers, though, has to do with our new 401(k)s. I only have one old 401(k) account with a couple thousand bucks in it, but some of my editors have a half dozen from previous jobs. That’s led to a lot of newsroom debate: How many 401(k)s is too many 401(k)s? What should I do with them when I get a new job?

I called Andrew Meadows, senior vice president at Ubiquity Retirement + Savings, to walk me through the minefield that is saving for retirement. Luckily, Meadows told me I have a couple of options for my cash.

First, I could keep my money in the old employer’s 401(k). If I like the investment options or I’m too lazy to deal with moving it, leaving the sum where it is might be beneficial. But I may have to pay fees. Plus, if my balance is under $5,000, my old employer can actually kick me off the plan. (It’s called a force out, and no, it does not involve Kylo Ren.)

Second, I could roll my money over into my new employer’s 401(k). Before doing this, Meadows advised me to see what the fees are like and whether I like the investments my new employer’s 401(k) offers.

He also said to be aware it’s a pain in the ass (my words, not his).

“We do not make rolling over your money very easy,” Meadows adds. “It takes, in many cases, a paper form. We need your signature. You have to mail it in with snail mail and wait for 30 days or so until it processes. You get a check written out not to you but to a retirement account… it’s really an arduous process when you’re looking at thousands of dollars you worked really hard to save.”

Meadows was referring to the steps for requesting a rollover from my old plan, which results in a check that I then have to send to my new plan. If I go this route, I could also ask the trustee of my old 401(k) to transfer my balance and shortcut the whole process.

Third, I could open an individual retirement account, or an IRA. They’re pretty popular: More than a third of households have IRAs, and roughly 60% of those contain rollover assets from 401(k)s, according to a study from the Investment Company Institute.

There are tons of online options for IRAs, but Meadows said that since I’m a beginner, a good place for my IRA might be my bank. It’s a financial institution I know and want to build loyalty with. Plus, I can always move the money from my IRA into a 401(k) if I change my mind later on.

“If you’re not ready to move it to another employer, move it to your bank,” he says. “They’ll appreciate it.”

As for the question of how many accounts to have, Meadows said he likes to group his money together so it generates more compound interest.

“The bigger the snowball is, the bigger it’s going to get as you roll it down the hill,” he says. “Small accounts all over the place are going to make lots of little snowballs.”

There is an argument to be made for having a bunch of mini snowballs: diversification. It’s the same theory as not carrying all my eggs in one basket. It might be smart to keep my retirement separate from my checking separate from my savings juuust to cover my bases.

Bottom line: How many 401(k)s I have is up to me. I probably shouldn’t have them too spread out, but I also shouldn’t feel compelled to move my balance to my new employer’s plan if I don’t like it. It depends on personal preference and the investments.

According to Meadows, the only major way to go wrong is if I choose to cash out my 401(k). Because I’m under 59 ½, I’ll have to pay taxes and a penalty. Plus, I’ll screw over Future Julia.

“Yes, that thousand dollars sounds really great right now, but when you retire that thousand dollars could be worth so much more,” he says.

More from Money:

It's Crucial to Enroll in Your Company's 401(k). Here's Why and How to Do It

These Companies Have the Best 401(k) Plans

Your 401(k) May Soon Have Fewer Investment Choices — But That's a Good Thing