What to do with your 401(k) when you leave a job

When you leave a job, your old 401(k) doesn't automatically come with you. You have four choices. The default — leaving it behind — is rarely the best option, but most people choose it because they don't know what else to do.

Option 1: Leave it in the old 401(k)

Possible if your balance is over $5,000-$7,000 (varies by plan). You keep the same investments and fees. The downside: you lose visibility, you can't make new contributions, and you may forget about it entirely.

Option 2: Roll it into your new 401(k)

Consolidates your retirement savings in one place. Easier to manage. Some 401(k)s have great low-cost institutional funds you can't access elsewhere. Some have high fees and limited choices. Compare before rolling.

Option 3: Roll it to an IRA

The flexibility champion. Hundreds of investment options, your own account, full control. Open a Rollover IRA at Fidelity, Schwab, or Vanguard and request a direct rollover from your old 401(k). The transfer is tax-free if done correctly.

Option 4: Cash it out (almost always wrong)

You pay full income tax plus a 10% penalty if you're under 59½. A $50,000 401(k) cashed out can leave you with $30,000-$35,000. Worse, you lose decades of compounding. Almost no situation justifies this.