"This is most likely to be a temptation early in your career when you have more frequent job changes, smaller account balances and a longer retirement horizon," says Van Fleet. "However, these small benefits, if left in a plan and allowed to compound over your working career, can significantly enhance your ultimate retirement resources."
5. AVOID THE AVOIDABLE TAXES
Not many participants deposit cash above the maximum deferral amount, but there are other ways to get taxed on retirement savings as well. For instance, transferring benefits directly, rather than allowing them to roll over to a successor plan, eliminates the need to satisfy withholding tax obligations and timing rules.
Another factor to consider is a Roth IRA -- which gets taxed before the contribution -- versus a 401(k), which is taxed upon withdrawal. The right choice depends on whether one believes tax rates will rise or fall.
All participants should know the tax rules and how they apply to each individual situation before choosing a plan, figuring out contributions and making any withdrawals or changes. While no one has a crystal ball, it's always best to make an informed choice.
