What to Do With Your 401(k) When You Change Jobs

Changing jobs is exciting, but it comes with a financial to-do list that many people overlook. One of the most important items on that list? Figuring out what to do with your old 401(k). The decision you make can have lasting implications on your retirement savings, so it pays to understand your options before you do anything.

Your Four Main Options

1. Leave It With Your Former Employer

Many plans allow you to keep your money where it is after you leave. This can make sense if your old plan has strong investment options or low fees. That said, you lose the ability to make new contributions, and managing multiple accounts across different employers can get complicated over time.

What to consider: Check the plan's fee structure and whether your former employer allows former employees to stay enrolled indefinitely.

2. Roll It Into Your New Employer's Plan

If your new employer offers a 401(k) with solid investment options, rolling your old balance into the new plan can simplify things. You keep everything in one place and maintain the tax-deferred growth.

What to consider: Not all plans accept incoming rollovers, so check with your new HR department before assuming this is an option.

3. Roll It Into an IRA

Rolling your 401(k) into an Individual Retirement Account (IRA) gives you more control over your investment choices and often more flexibility in how you manage your money. This is one of the most common routes people take.

What to consider: Make sure you do a direct rollover, meaning the funds go straight from your old plan to the IRA custodian. If the check is made out to you personally, you have 60 days to redeposit it or you may owe taxes and penalties.

4. Cash It Out

This is the option to avoid if at all possible. Cashing out your 401(k) early triggers ordinary income taxes on the full amount, plus a 10% early withdrawal penalty if you're under age 59.5. What feels like a windfall now can cost you significantly down the road.

What to consider: Even a modest 401(k) balance, if left to grow, can compound significantly over time. Cashing out resets that clock to zero.

The Bottom Line

A job change is one of the most common times people unintentionally derail their retirement progress. Taking a few intentional steps now can protect the savings you have worked hard to build. If you are unsure which path makes the most sense for your situation, reach out to schedule a conversation. We are happy to walk you through it.

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