24 Feb My job ended our 401(k). How do I invest the money?

Q. My job discontinued my 401(k) and sent me the money in a check. How do I invest it for my retirement? I’m 54 years old.
— Unsure

A. It sounds like you want to keep the money protected for your future, and that’s terrific.

The more you save now, the more you will have to help support your lifestyle in your older years.

For your situation, the first thing to do is to open an IRA rollover account with an investment custodian, said Nicholas Scheibner, a certified financial planner with Baron Financial Group in Fair Lawn.

“You’ll want to deposit those funds into that account as soon as possible to avoid any taxation on the funds,” he said.

You have 60 days to do this before it would be considered a withdrawal and you would also face an early-withdrawal penalty.

Next, you need to consider the time frame for when you will need the money.

“If you need this money in the next few months, you may not wish to invest it. Keep the funds in cash, so that you’ll be certain the full account value is there when you need it,” Scheibner said.

But if you’re planning to invest for the long-term, you need to consider your tolerance for risk.

“There is no certainty when it comes to investing,” he said. “You can choose investments that are typically more stable and may generate a smaller return on your investment, or you can choose to invest in typically riskier investments that may generate a larger return. Nothing is guaranteed.”

Based on your personal financial plan, you may need to take more risk to achieve your goals in retirement. Or, you may have enough saved that you do not need much risk in the plan, he said.

This is where a financial advisor can help you if you don’t have the time or inclination to make investment choices.

You should consider the emotional scale of how you react when the account loses or gains value.

“We’re all happy when the account increases in value. But how will you feel if the account loses 10%? How about 20%? Stocks were down nearly 30% in March of 2020,” Scheibner said. “An investment advisor can help guide you during those times, but you ultimately need to be able to stomach the amount of volatility in your portfolio.”

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This story was originally published on Feb. 24, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.