As Christians, we’re called to be wise stewards of the resources God has entrusted to us (Luke 16:10-11). If you have a dormant traditional 401(k) from a previous job, you may be wondering how to manage it faithfully. Should you leave it as is, roll it over, or explore other options? At Greenway Financial Planning, we’re committed to helping Christians make biblically grounded financial decisions. This guide will walk you through your 401(k) options in 2025 with clarity and purpose.
Step 1: Prayerfully Review Your 401(k) Plan
Before making any decision, take time to pray for wisdom (James 1:5) and review your 401(k)’s Summary Plan Description. Consider:
- Is the plan managed with integrity and low fees?
- Do the investment options align with your values and goals?
- Does it support your calling to steward your resources well?
If your 401(k) is well-managed and meets your needs, keeping it in place may be a faithful choice. But if high fees or limited options hinder your ability to grow God’s provision, a rollover might be worth exploring.
Key Scenarios Through a Christian Lens
Your decision about a dormant 401(k) should reflect your financial needs, life stage, and trust in God’s guidance. Here are common scenarios and options to consider prayerfully:
1. You’re Over 59½ and Seeking Income
If you’re over 59½, you can take distributions from your 401(k) or an IRA without a 10% penalty, though they’re taxed as ordinary income. As you plan for this season, consider:
- Leaving Funds in the 401(k): If the plan has low fees and aligns with your values, it may continue to serve you well.
- Rolling to an IRA: An IRA offers more investment flexibility, allowing you to choose funds that reflect Christian principles, such as avoiding companies that conflict with your faith.
2. You’re Under 59½ and Need Income
If you’re younger than 59½ and need funds, withdrawals are taxable and may incur a 10% penalty unless an exception applies. Trust God to guide you through these options:
- Separation from Service Distribution: Some plans allow penalty-free withdrawals after leaving an employer, which could meet urgent needs.
- Substantially Equal Periodic Payments (SEPP): You can set up a series of withdrawals from your 401(k) or an IRA to avoid penalties, providing income while honoring your long-term goals.
- Hardship Withdrawal: If rolled into an active 401(k) that allows it, hardship withdrawals can cover qualifying expenses, such as medical or housing needs.
3. You Want to Continue Contributing
If you hope to grow your retirement savings in the future, perhaps to support ministry or family, consider keeping the 401(k) active or rolling it into an IRA. IRAs often allow more flexibility for contributions, especially for those with variable income or side hustles.
4. You’re Nearing Required Minimum Distribution (RMD) Age
At age 73 (the RMD age in 2025), you’ll need to take annual distributions from your 401(k) or IRA. Rolling over to an IRA can simplify RMDs, helping you manage multiple accounts with clarity and focus on giving back to God’s work.
5. You Have a 401(k) Loan
If you have an outstanding 401(k) loan, rolling over could require repaying the balance by the tax filing deadline for the year you left your employer. Alternatively, rolling into a new employer’s plan that allows loans may provide flexibility while maintaining responsible stewardship.
6. Your 401(k) Holds Company Stock
If your 401(k) includes company stock, Net Unrealized Appreciation (NUA) could offer tax advantages. By rolling the stock into a taxable brokerage account, you may pay ordinary income tax only on the stock’s basis, with appreciation taxed at lower capital gains rates. Seek God’s wisdom and professional advice to ensure this aligns with your goals.
7. You Want to Simplify Your Finances
Consolidating multiple 401(k)s or IRAs into one account can help you manage your resources with greater clarity, freeing you to focus on God’s calling. A rollover to an IRA or new employer’s 401(k) can streamline your financial stewardship.
Why Consider a Rollover?
Rolling over a 401(k) can align with biblical principles of wisdom and diligence:
- Faith-Aligned Investments: IRAs often offer access to funds that avoid industries conflicting with Christian values.
- Lower Fees: Reducing high 401(k) fees ensures more of God’s provision grows for your future.
- Simplified Stewardship: Consolidating accounts makes it easier to track and manage your resources.
- Tax Efficiency: Strategies like NUA can minimize taxes, freeing up funds for giving or family needs.
However, keeping your 401(k) may be wise if it offers low-cost funds, unique features, or penalty-free withdrawal options that serve your goals.
Next Steps: Seek God’s Guidance
As you decide what to do with your 401(k), lean on Proverbs 3:5-6: “Trust in the Lord with all your heart, and do not lean on your own understanding.” Here’s how to proceed:
- Pray for Discernment: Ask God for clarity in managing your retirement savings.
- Review Plan Details: Assess fees, investments, and alignment with your values.
- Explore Options: Weigh leaving the 401(k), rolling to an IRA, or transferring to a new plan.
- Seek Wise Counsel: A Christian financial planner can help you navigate complex decisions with faith and confidence.
At Greenway Financial Planning, we’re passionate about helping Christians steward their finances in a way that honors God. Whether you’re planning for retirement, managing RMDs, or consolidating accounts, we’re here to serve you.