Changing employers is exciting, but your retirement savings deserve a plan too. Here are your four options and how to choose the right one.
Your Four Options
You have a choice, and it matters.
When you leave a job, your old 401(k) or 403(b) does not disappear, but it does not move itself either. You generally have four paths forward, and each comes with real trade-offs:
- Roll over to your new employer’s 401(k) or 403(b)
- Roll over to an IRA (Traditional and/or Roth)
- Leave it with your old employer
- Cash it out
Option 1: Roll It Into Your New Employer’s 401(k)
If your new company’s plan accepts rollovers, most do, you can move your balance directly into the new plan.
Why this works:
- Keeps everything consolidated in one place
- Easy to manage going forward
- Maintains access to features like potential loan options
Best if:
- Your new plan offers low-cost investment options
- You prefer simplicity
- You want everything in one account
What to watch for:
Not all plans are created equal. Some have limited options to access the rollover or higher-fee investment choices, so review your new plan options first.
Option 2: Roll It Into an IRA
A direct rollover to a Traditional or Roth IRA typically gives you more flexibility than an employer plan.
Why this works:
- Access to a wider range of investments such as stocks, bonds, and ETFs
- Potential for lower fees
- Ability to consolidate multiple old 401(k)s or 403(b)s.
Best if:
- You want more control and flexibility
- You are managing multiple retirement accounts
- You are focused on optimizing investments
Important:
If you have a Roth 401(k), roll it into a Roth IRA to preserve tax-free growth and start your 5- year clock.
What to watch for:
- IRAs don’t offer 401(k) style loans; you lose that borrowing option permanently
- Some IRA providers charge account fees or commissions that offset flexibility gains
- Creditor protections on IRAs are weaker than on 401(k)s in some states
- Required Minimum Distribution (RMD) rules differ; confirm your timeline
Option 3: Leave It With Your Old Employer
If your balance is over $7,000, most plans allow you to leave it where it is.
Why this works:
- No immediate action required
- Keeps your money invested
Best if:
- You are undecided on next steps
- Your old plan has strong investment options
The downside:
Accounts can become forgotten, unmanaged, or disconnected from your overall financial plan over time.
Option 4: Cash It Out
Withdrawing your 401(k) early can be costly, especially if it could put you in a higher tax bracket.
Here is what happens:
- You will owe income taxes on the full amount (federal and state).
- You will likely pay a 10 percent early withdrawal penalty prior to 59 ½.
On a $50,000 balance, that could mean losing $12,000 – $15,000 immediately and paying an additional $5,000 at tax time for a 10% penalty.
Only consider this if:
You are facing a true financial emergency.
The real cost:
You are not just losing money today. You are losing years of compound growth.
How to Roll Over Your 401(k)
The process, step by step
Always request a direct rollover so funds move straight between accounts. The check should be made payable to the financial institution you are rolling the money to. If a check is made payable to you, 20 percent is automatically withheld for taxes.
- Open your new account
Make sure your IRA or new 401(k) is ready to receive funds and that you have the right accounts available (Traditional or Roth) - Contact your old retirement plan provider or administrator
Request a direct rollover and ask for instructions - Complete the paperwork
Most plans allow you to do this online or by phone - Confirm if you will receive a check or if it will be directly transferred
Many 401(k) providers will send a check directly to you which will need to be forwarded to the new company.
Quick Checklist
Before making a move, confirm:
- Your vested balance. Not all employer contributions may be yours yet
- Whether your new plan accepts rollovers (both Traditional and Roth)
- You are requesting a direct rollover, not indirect
- Roth accounts go to Roth, Traditional to Traditional
- You track the transfer until funds arrive
- You update your beneficiaries
Not Sure Which Option Is Right for You?
Every job change is different, and the wrong move can cost you in taxes, fees, or lost growth.
A quick conversation can help you make the decision that keeps more of your money working for you.
Need to check on any old 401(k) or 403(b) accounts but don’t know where to look?
Visit the DOL’s new Retirement Saving Lost and Found Database: https://lostandfound.dol.gov/