When you leave a job you have four choices for the old 401(k): leave it in the old plan, move it to your new employer’s plan, roll it into an IRA, or cash it out. Cashing out is almost always the costly one: the money becomes taxable, usually with a 10% penalty added if you leave before the year you turn 55. Of the other three, an IRA is the most common choice but not automatically the best. What decides it is what you’ll pay each year, and whether one of four reasons to keep money in a plan applies to you. If an advisor recommends the rollover, find out what they earn on it: at the median fee of 1% of assets, a $300,000 rollover pays the advisor $3,000 a year.
The four options
| Option | Best when | Watch for |
|---|---|---|
| Leave it in the old plan | The plan has low-cost funds and you’re 55+ or hold company stock | Old accounts get forgotten; small balances may be moved out for you |
| Move it to the new plan | You want one account and the new plan’s funds are good | Not every plan accepts rollovers; you’re limited to its fund menu |
| Roll it to an IRA | You want wider choices or to combine several old plans | The IRA’s fees plus any advisor fee; the rules below that only plans offer |
| Cash it out | Almost never | Income tax on the whole balance, plus 10% if you leave before the year you turn 55 |
You can also mix them. FINRA’s guidance on rollovers says so directly, and it lists what should be compared: investment options, fees, services, penalty-free withdrawals, creditor protection, required withdrawals and employer stock.
The mechanics of moving the money, direct rollovers, the 60-day rule and the 20% withholding, are covered in the rollover glossary entry. This guide is about whether to move it at all.
Compare what you’d pay
Your plan has to tell you what it costs. Federal rules require it to give you each fund’s annual expenses at least once a year, and a quarterly statement of the administrative fees actually taken from your account. Find those two documents before you decide.
Then price the IRA: the funds’ expense ratios, any account fees, and the advisor’s fee if someone will manage it. That last one is usually the largest line.
The percentage fee repeats every year and grows with the balance. If you plan to keep the money in simple index funds, a one-time plan or a few hours of advice costs far less than paying a share of the account each year. Our guide to whether 1% is too much shows the gap over 10 and 20 years.
Four reasons to keep money in a plan
- You’re leaving at 55 or older. Withdrawals from the plan of the employer you leave in or after the year you turn 55 avoid the 10% early-distribution tax. Roll it to an IRA and that’s gone until 59½.
- You hold your employer’s stock. Rolling it into an IRA ends the chance to use NUA, which can turn much of the gain into a long-term capital gain. See our guide to company stock in a 401(k) before you move anything.
- You use, or plan to use, the backdoor Roth. Pre-tax money in an IRA makes most of each conversion taxable under the pro rata rule; money in a 401(k) doesn’t count. See the backdoor Roth entry.
- You want the strongest creditor protection. FINRA notes that federal law broadly protects plan assets from creditors, while IRA protection outside bankruptcy depends on your state.
If none of these apply and the IRA costs about the same or less, the IRA is usually simpler. Moving an IRA between firms later is easy; see how to switch advisors.
Check these before you move anything
Your vested balance. Your own contributions are always 100% yours. The employer’s match follows the plan’s schedule, for example nothing until year 3 and then all of it, or a scale that reaches 100% in year 6. Unvested money can be forfeited when you leave. If you’re a few weeks from a vesting date, that may decide your last day.
Any outstanding loan. If the plan offsets a loan when you leave, you can avoid tax on it by putting the same amount into an IRA or your new plan by your tax filing due date, including extensions.
Roth 401(k) money. It can roll into a Roth IRA, but a Roth IRA’s own five-year clock for tax-free earnings starts with the first year you contributed to any Roth IRA. Time in the Roth 401(k) doesn’t carry over. If you’ve never had a Roth IRA, opening one now starts that clock.
This year’s contribution limit. The 2026 limit on your own deferrals is $24,500, plus $8,000 if you’re 50 or older, or $11,250 if you’re 60 to 63. It applies to you across every plan, not to each employer. Lower your rate at the new job if you contributed at the old one; any excess must be taken out by April 15 of next year.
Accounts you’ve lost track of. The Labor Department’s Retirement Savings Lost and Found searches for private-sector plans tied to your Social Security number.
Common mistakes
- Taking a check. A distribution paid to you has 20% withheld, and you have 60 days to replace the full amount. A direct rollover avoids both.
- Rolling to an IRA by default when you’re 55 or older, hold company stock, or rely on the backdoor Roth.
- Comparing fund lists instead of costs. More choices don’t help if the total fee doubles.
- Selling company stock inside the plan before checking NUA.
- Leaving four old plans behind. If you do leave money in old plans, keep a list with the logins and beneficiaries.
Questions to ask anyone recommending a rollover
- What will I pay each year in the IRA, in dollars, including your fee, compared with what I pay in the plan now?
- What do you earn if I roll this over, and what if I leave it where it is?
- Did you check the 55 rule, company stock and my backdoor Roth plans?
- Which funds would you use, and what do they cost?
- Will you put that comparison in writing?
Brokers making a rollover recommendation are held to a best-interest standard; investment advisers are fiduciaries for the whole relationship. Our guide to whether your advisor is a fiduciary explains the difference.
When a fee-only advisor is worth it, and what it costs
A planner adds the most when the rollover is large, you’re within ten years of retiring, you hold company stock, or you’re combining several accounts and want one plan for all of them. A fee-only planner paid by the hour or a flat fee gets paid the same whatever you decide, which is the point.
- Hourly: a median $300 an hour, enough for a rollover comparison. See hourly planner costs.
- One-time plan: a median $2,000, if the job change is part of a bigger plan. See one-time plan costs.
- Ongoing planning: a median $4,500 a year, middle half $2,400 to $7,200.
- Percentage of assets: a median 1%, usually including investment management.
Where to look
Early in a career, start with advisors for early-career professionals and the advisors for early-career professionals list. Closer to retirement, see advisors for pre-retirees, retirement planning specialists and the retirement planning specialty. For a one-time answer, browse flat-fee advisors and the flat-fee planning specialty. If the job change came with a layoff, our job loss and severance guide covers the rest of the deadlines.