401(k) Q&A: What Happens When You Leave an Employer?
When you leave a job and start a new one, your 401(k) is often the last thing on your mind. Between onboarding, learning new systems, meeting new people, and getting the lay of the land, retirement savings can easily fall to the bottom of the list.
Still, it’s important not to forget about your 401(k)—the decisions you make now can have a meaningful impact on your long-term financial picture.
A 401(k) is an employer-sponsored retirement savings plan that allows you to contribute part of your paycheck—often with an employer match—into an investment account intended for long-term retirement growth.
Q: What happens to my 401(k) when I leave my job?
Your 401(k) doesn’t disappear or get lost. You still own the money you contributed, along with any vested employer match. What changes is that you typically can’t add new contributions to that plan anymore, so you’ll need to decide what to do with it.
Q: What options do I have for my 401(k) after leaving an employer?
Most people have four main options:
Leave it in your former employer’s plan
Roll it into your new employer’s 401(k)
Roll it into an IRA (Individual Retirement Account)
Cash it out (usually the least favorable option)
Each choice has pros and cons depending on your situation.
Q: Can I leave my 401(k) where it is?
Yes—if your account balance meets the plan’s minimum requirements. This can be a good short-term option, especially if you like the investment choices or low fees. However, you won’t be able to contribute more, and managing multiple old accounts can get confusing over time.
Q: What does it mean to roll my 401(k) into a new employer’s plan?
If your new job offers a 401(k), you may be able to move your old balance into the new plan. This can simplify your finances by keeping everything in one place. The key things to check are the new plan’s fees, investment options, and whether rollovers are allowed.
Q: What is a rollover to an IRA, and why do people choose this?
Rolling your 401(k) into an IRA often gives you:
More investment choices
Greater flexibility
Potentially better coordination with your overall financial plan
This is a popular option for people who want more control or are working with a financial advisor.
Q: Should I cash out my 401(k)?
In most cases, cashing out is not recommended. Withdrawals before age 59½ typically trigger:
Income taxes on the full amount
A 10% early withdrawal penalty
You also lose the future growth potential, which can significantly impact long-term retirement outcomes.
Q: What about taxes—will I owe anything if I roll it over?
If done correctly (a direct rollover), moving your 401(k) to another retirement account does not trigger taxes or penalties. Taxes usually only apply if the money is withdrawn instead of rolled over.
Q: How do I decide which option is best for me?
The right choice depends on factors like:
Your age and career stage
Whether you’re changing jobs or retiring
Investment preferences
Fees and plan quality
How much support you want managing your investments
A thoughtful review can help ensure your retirement savings stay aligned with your bigger picture.
Q: When should I make a decision about my old 401(k)?
There’s usually no immediate rush—but it’s best not to ignore it. Making an intentional choice sooner can help avoid unnecessary fees, lost paperwork, or missed opportunities to optimize your retirement strategy.
Career transitions come with a lot of moving parts, and your 401(k) doesn’t have to be something you navigate alone. If you have questions or want help thinking through your options, we’re here to help—reach out anytime!
Shean