Thursday, December 11, 2014

401K Fun

As I learn more about finances, I'm realizing just how much there is I need to know. I recently learned one big lesson the hard way and it's been an interesting pill to swallow.

When I left my last job in April, I had a 401K with that company. They had matched 3% to the 6% I contributed so it was sitting just under $6,000.

I regularly saw that money on my Mint account and loved that tiny investment portion of my finances. Even after sitting down with 2 financial advisers, I didn't realize I had to do something with that money after leaving the company. However, when I recently logged into my account, there was a notice that said I hadn't taken action on my 401K after 6 months of not being employed with that company so the account would be liquidated.

Oh.

Apparently I was supposed to roll it over into an IRA if I wanted to keep the funds for retirement. I guess that makes sense because I wasn't vested with my company so they couldn't keep their match tied up with me when they could get it back. I just didn't know and admittedly didn't make the effort to learn.

So after the company match, taxes, and the 10% fee were removed, I had a check for about $3,000 in my hand. It bums me out that I don't have that money for retirement anymore and come to think of it, I could have just re-invested it. But I didn't.

Debt has obviously been a big struggle for me and it was my first instinct to knock out $3,000 worth of debt with that money. And that's exactly what I did. At the unfortunate sacrifice of retirement, I'm happy to announce I will be ending 2014 completely credit card debt free.

Going forward, I will also be working to save towards retirement because now I'm really behind. I have been with my current company for 6 months now, which means I am eligible for a 4% match that is 100% vested at the start of the new year. I will take advantage of that and the rest of my extra income will still go towards debt repayment. 

It is a huge relief to kick off 2015 with a financial focus on student loans. I felt incredibly guilty having credit card debt because it's obvious proof of not spending wisely despite the mountain of student loans I have. As the spending challenge continues, I want my hard work to reflect smart spending habits.


4 comments:

  1. I AM SO PROUD OF YOU!!! That is absolutely amazing (not necessarily how the 401k stuff all worked out- but how you handled it!) You rock girl :) Cheers to awesome financial focus in 2015!!

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  2. I worked a temp job and didn't know that I had a 401K through the temp agency. Several months after my last project I got a check because I didn't do anything with the 401K. It was a lovely surprise at the time, but unfortunately you have to pay taxes on it. That was a fun lesson come tax time. Congrats on entering 2014 credit card debt free!

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  3. I found your blog through a post over on Mr. C and Me (http://mrcandmeblog.wordpress.com/2014/12/14/lets-talk-money-part-7-food-for-thought-an-update/), and this post spoke to me. I have a 401K balance sitting from a job I haven't been in for more than two years. I've just been putting off rolling that money into my current 401K. Now you have me panicked. I might have to take care of that soon.

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  4. Yay for being credit card debt free. That's a bummer about your 401K. I left my 401k with the first company I was with. I was vested with them, so I'm not losing by doing that, but I kind of wish I had rolled it over to an IRA just so it would be less hassle to keep track of. I'm surprised they would have let you keep the matching not being vested as the companies I've been with haven't even if you were going to roll it over. My 401K from my last job shrank a lot after they took back their matching contributions since I was not with them long enough to be vested.

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