What Should I Do With an Old 401(k)?
Leave it, roll it to your new employer's plan, roll it to an IRA, or cash it out. Here's how the four options compare on fees, choices, taxes, and convenience.
Quick answer
You usually have four options: leave it in the old plan, roll it to your new employer's plan, roll it to an IRA, or cash it out. The first three keep the tax advantages; cashing out usually triggers income tax and possibly a 10% additional tax. If you move it, use a direct rollover.
Comparing the options
| Option | Pros | Watch for |
|---|---|---|
| Leave it in the old plan | No action needed; may keep low-cost institutional funds | Losing track; limited choices; small balances may be forced out |
| Roll to new employer's plan | One account; possible loan access; age-55 rule applies | Plan's fees and fund menu |
| Roll to an IRA | Wide investment choice; consolidation | Fees vary; affects backdoor Roth pro-rata rule; loses age-55 rule |
| Cash out | Immediate cash | Taxes, possible 10% additional tax, lost growth |
Cashing out costs a lot
See early withdrawal penalties for a worked example: a $30,000 withdrawal at 45 can leave about $20,400 after federal tax and the additional tax.
Moving it safely
Ask for a direct rollover so no taxes are withheld; see direct vs. indirect rollovers. Check for outstanding loans first; see 401(k) loans.
The takeaway
Keep the money tax-advantaged. Choose between leaving it, moving it to your new plan, or an IRA based on fees, investment options, and whether you'll need the age-55 rule.
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