What Happens to Your 401(k) When You Change Jobs

Changing jobs is stressful enough without wondering what happens to your 401(k). The short answer: it’s still yours. The money stays in the old plan until you tell the plan (or your new employer’s plan, or an IRA) where to send it.

You have a few choices. You can leave the balance where it is. You can roll it into an IRA. You can roll it into your new employer’s 401(k) if the plan allows it. Or you can cash out, which usually means taxes and penalties and a big hit to your retirement savings. Most people are better off leaving it or rolling it over.

Leaving the money in the old plan is fine if you’re happy with the investment options and fees. You won’t be adding to it anymore, but it keeps growing with the market.

Rolling into an IRA gives you more control. You can pick any broker and almost any investment. You also consolidate old 401(k)s in one place, which makes it easier to see your total picture and manage your asset allocation. If you're still contributing to a 401(k) at your new job, our 401(k) Retirement Calculator can show you how your balance might grow over time.

Rolling into your new 401(k) keeps everything in one employer plan. That can be simpler, and some people prefer having one less account. Not all plans accept rollovers, so you have to check.

If you do a direct rollover (the plan sends the money straight to the new IRA or 401(k)), you don’t pay tax or penalty. The key is not taking the money into your own hands. If the old plan sends you a check, they may withhold 20% for taxes. You’d need to put the full amount (including what was withheld) into the new account within 60 days to avoid tax and penalty, and you’d get the withheld amount back when you file. It’s much cleaner to do a direct transfer so the check goes to the new custodian, not you.