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

11/1/2025

Changing jobs can be an exciting time in your career, but it can also bring up important financial questions, especially when it comes to your retirement savings. If you have a 401(k) with your previous employer, it’s important to make sure you’re aware of your options.

Understand Your 401(k) Options

When you leave a job, you have a few options for what to do with your 401(k). The decision you make will impact your retirement savings strategy, so it’s important to choose wisely.

Here are the 4 primary options:

Option 1. Leave Your 401(k) with Your Former Employer

If your previous employer’s 401(k) plan allows it, you can leave your account with them. However, this may not always be the best option for a few reasons. You may have limited investment options, and you can’t make additional contributions.

In addition, your employer may charge administrative fees that could eat into your savings over time.

Option 2. Roll Over Your 401(k) into Your New Employer’s Plan

If your new employer offers a 401(k) plan, you may have the option to roll over your old 401(k) into the new one. This option can be a good choice because consolidating your retirement savings into one account makes it easier to manage. Your money will continue to grow tax-deferred, just as it did with your previous employer’s plan.

Option 3. Roll Over Your 401(k) into an IRA

Another option is to roll your 401(k) over into an Individual Retirement Account (IRA). This can provide more flexibility and investment options than a 401(k) plan. Here’s why you might consider this:

IRAs typically offer a broader range of investment options compared to a 401(k), and you might be able to find an IRA provider with lower fees than your previous employer’s plan. And, if you’re inclined to actively manage your investments, you’ll have more control over how your money is invested.

Option 4. Cash Out Your 401(k)

You can choose to cash out your 401(k), but this is usually the least recommended option. If you’re under the age of 59 ½, you’ll likely face a 10% early withdrawal penalty along with taxes on the amount you withdraw. You’ll also be missing out on future tax-deferred retirement savings that would have been accrued if you had left the money invested which could significantly impact your retirement goals.

Read more: Navigating Your 401(k) Choices: To Roll Over or Not?

 What Happens If You Forget to Move Your 401(k)?

If you don’t take action with your 401(k) after changing jobs, you could face several consequences:

Fees and Inactivity: Many 401(k) plans impose fees on accounts that are left dormant. These fees can erode your savings over time. Employers might also close or transfer accounts with small balances, which could result in your retirement savings being moved to a different plan or even cashed out if the balance is low enough.

Loss of Investment Control: By not moving your 401(k), you may lose the opportunity to make changes to your investments. Most 401(k) plans have limited investment choices, which may not align with your current retirement goals. Without the ability to manage your funds actively, your investments could underperform or fail to match your desired asset allocation.

Difficulty Accessing Your Funds: As time passes, it may become more challenging to track your old 401(k) account, especially if your employer changes its plan administrator or if you’ve moved several times. In some cases, old employers may no longer be able to help you access the account if you've forgotten about it, making it more difficult to roll over or withdraw your funds.

Read more: Understanding the Differences: Pension, Social Security, IRA, and 401(k)

Tips for Managing Your 401(k) During a Job Change

To ensure you make the most of your 401(k) and avoid potential issues, here are a few tips to keep in mind.

Start early! As soon as you leave your job, take the time to review your 401(k) options. Don’t put off making a decision, as the longer you wait, the harder it may be to manage your account.

Consider your retirement goals. Before making a decision, think about your long-term retirement goals and which option will best align with those objectives. If needed, consult a financial advisor. If you’re unsure of what to do with your 401(k), seeking professional advice can give you the confidence to move in the right direction. An advisor can help you understand your options and make the best decision for your situation.

Finally, if you decide to leave your 401(k) with your old employer, make sure they have your current contact information so you can stay updated on any changes to your plan.

The Bottom Line

Changing jobs is a significant life event, and it’s also an important time to review and manage your retirement savings. Leaving your 401(k) with your old employer, rolling it over to a new plan, or transferring it to an IRA are all viable options, but it’s crucial to stay proactive and make an informed decision. Don’t let your retirement savings fall by the wayside; taking the time to carefully manage your 401(k) today can set you up for a more financially secure future.

 

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