Cleaning Up Your Financial Junk Drawer

If you've ever had a W2 job before going full-time as a creator—or worked anywhere with a 401(k) before moving on—there's a good chance you have old retirement accounts sitting somewhere, unmanaged and forgotten. That's what we call the financial junk drawer. Here's how to clean it up.

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The Old 401(k) Problem

When you leave a job, your 401(k) doesn't disappear—it just sits there. And if you've had more than one employer, you might have more than one of these accounts floating around in the background, invested in whatever default fund they were set up with years ago.

You have four options for what to do with an old 401(k). Here are the pros and cons of each—and why one of them is almost always the right move.

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Option 1: Leave It with Your Former Employer's Plan

Pros

• Tax-deferred growth: Your savings continue to grow tax-deferred until you start making withdrawals.
• Possible lower fees: If you have a strong plan, you may be able to retain low-cost investment options.
• Easy and familiar: You already know the plan's rules and investment options. Doing nothing is the path of least resistance.

Cons

• Limited control: You can't make new contributions or take loans.
• Communication issues: It can be harder to get updates or support when you're no longer an active employee.
• Potential fees: Some plans charge additional fees for former employees or require a minimum balance.

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Option 2: Transfer into Your New Employer's Plan

Pros

• Consolidation: Keeps everything in one place.
• Tax-deferred growth: Continues as before.
• Potential delayed RMDs: Required minimum distributions may be delayed if you're still working past age 73.

Cons

• Limited investment options: You're subject to whatever the new plan offers.
• Withdrawal restrictions: You may not be able to access funds until you leave that employer too.
• Potential delay: The new plan may not be available immediately.

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Note: If you're a full-time creator with no new employer plan, this option isn't available to you—which makes the IRA rollover even more relevant.

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Option 3: Cash It Out

This is almost always the wrong move, but here's the full picture:

Pros

• Immediate access: You get the money now.

Cons

• Taxes: Your former employer is required to withhold 20% for taxes.
• Penalties: If you're under age 59½, you'll owe an additional 10% penalty—unless you qualify for the Rule of 55 or another exemption.
• Reduced savings: You're permanently giving up years of potential tax-deferred growth.

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Option 4: Roll It Over into an IRA

This is the right move for most people—and especially for creators who are now self-employed and don't have a new employer plan to roll into.

Pros

• More investment options: Access to a much wider range of investments, including stocks, bonds, and ETFs.
• Possible lower fees: Potentially lower management and administrative fees than your old plan.
• Flexibility: Easier to manage, consolidate, and monitor in one place.
• Tax-deferred status preserved: No taxes or penalties for rolling over.
• Professional management: Once in an IRA, it can be professionally managed as part of your broader financial picture.

Cons

• RMDs apply: Required minimum distributions start at age 73, regardless of employment status.
• No loan option: You can't borrow against an IRA the way you can some 401(k) plans.

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Why Rolling Over to an IRA Is Usually the Best Move

For most people—and especially for creators who've gone independent—rolling old 401(k)s into an IRA is the cleanest option. Here's why:
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1. More investment options. Most 401(k) plans offer a limited menu of mutual funds chosen by your former employer. IRAs give you access to a much broader range, and you can buy and sell holdings anytime—something many 401(k) plans restrict.
2. Clearer communication. When you're no longer an employee, getting support from a former plan can become difficult. An IRA gives you direct access to your account and advisor without going through an HR department that doesn't know you anymore.
3. Lower fees. 401(k) plans often carry higher management and administrative fees than IRAs. Rolling over can reduce what you're paying just to hold the account.
4. Potential Roth IRA conversion. A rollover is a natural opportunity to convert to a Roth account. With a Roth IRA, you pay taxes now and withdrawals are tax-free later—and there are no required minimum distributions. If you expect your income to grow (a reasonable bet for most creators), paying taxes at a lower rate today can be a smart move.
5. Simpler, standardized rules. 401(k) plans can vary significantly because employers have flexibility in how they design them. IRA rules are standardized by the IRS and consistent across institutions—easier to understand, easier to plan around.
6. Better options for your beneficiaries. When a 401(k) is inherited, it's often paid out as a lump sum, which can create significant tax consequences. Inherited IRAs generally offer more flexibility and better tax treatment for the people you leave money to.

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How to Actually Do the Rollover

There are two ways to move the money:
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1. Direct rollover (recommended). The funds go directly from your old 401(k) to your new IRA custodian. No taxes withheld, no deadlines to worry about. This is the cleanest approach. The three most common types:
   • Traditional 401(k) to Traditional IRA—taxes deferred, nothing owed at transfer
   • Roth 401(k) to Roth IRA—no taxes owed
   • Traditional 401(k) to Roth IRA—you'll owe income taxes on the converted amount
2. Indirect rollover (avoid if possible). You receive a check made out to you and have 60 days to deposit it into an IRA. If you miss the deadline, it's treated as a withdrawal—meaning taxes and potentially penalties on the full amount. Your former employer is also required to withhold 20%, which you'd have to replace out of pocket to roll over the full balance.

Bottom line: go direct whenever possible.

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Got Old 401(k)s Sitting Somewhere?

Consolidating old retirement accounts is one of the first things we help new clients tackle. It's one of those things that feels complicated but usually isn't—you just need someone to walk through it with you.

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Book a First Look Call with us—it's no charge. We'll take a look at what you've got and whether a rollover makes sense for your situation.

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_Disclosures

_{Before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and possession of employer stock. Please view the Investor Alerts section of the FINRA website for additional information.}

_{Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney.}

_{Distributions from traditional IRAs and employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty.}

_{Converting from a traditional IRA to a Roth IRA is a taxable event.}

_{A Roth IRA offers tax-free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.}