Rolling Over Your 401(k): What to Do When You Change Jobs

Posted on Mar 6, 2025

Changing jobs can be an exciting time, but it also comes with important financial decisions—one of which is what to do with your 401(k). If you've been contributing to a retirement plan through your employer, you’ll need to decide how to handle those funds. Here’s what you should know about your options, avoiding penalties, and making smart financial moves.

Your 401(k) Options

When leaving an employer, you generally have four options for your 401(k) funds:

1. Leave It with Your Former Employer – If the plan allows, you can keep your money where it is. This might be a good choice if the plan has low fees and strong investment options. However, you won’t be able to make additional contributions.
   
   
2. Roll It into a New Employer’s 401(k) – If your new job offers a 401(k) plan, you can consolidate your funds for easier management.
   
   
3. Roll It Over to an IRA – Transferring your 401(k) to an IRA gives you more investment choices and control over your retirement savings.
   
   
4. Cash It Out (Not Recommended!) – Taking a lump-sum distribution means you’ll owe income tax and possibly a 10% early withdrawal penalty if you're under 59½.

Making the right 401(k) decision is key to securing your financial future in retirement. A direct rollover ensures a smooth transition without taxes or penalties, while missing the 60-day window on a check deposit could lead to unwanted tax consequences. Choosing between an IRA and a new employer’s 401(k) depends on factors like fees, investment options, and employer benefits. Take the time to compare your choices and select the option that best aligns with your long-term financial goals.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.