What To Do With A 401(K) When You Change Jobs

Changing jobs comes with a lot of moving parts. New routines, new benefits, and new opportunities. But one area that often gets overlooked is your old 401(k). If you’ve recently switched jobs, what you do with your old retirement plan can have a long-term impact on your financial future.

You typically have four options:

1. Leave it where it is Most employers allow you to keep your 401(k) with them if the balance is above a certain level, often $5,000. While this requires no immediate action, it can be easy to forget about over time. Old plans may have limited investment options or higher fees.

2. Roll it into your new employer’s 401(k) If your new company offers a plan, you may be able to consolidate your retirement accounts by rolling the old 401(k) into the new one. This can make your savings easier to track, but not all employer plans have strong investment choices. The rollover process is not always simple without guidance.

3. Roll it into an IRA This is often the most flexible option. An IRA, or Individual Retirement Account, gives you more control over your investments and typically offers a wider range of choices than a 401(k). It also allows for better planning when it comes to taxes, retirement withdrawals, and legacy considerations.

4. Cash it out While it is technically an option, cashing out your 401(k) can come with serious downsides. You will owe income tax on the full amount, and if you are under age 59 and a half, you will also pay a 10 percent early withdrawal penalty. On top of that, you lose the long-term growth potential of the money you have already saved.

At Ramsey Financial, we walk clients through these options based on their specific situation. We compare investment choices, fees, and long-term strategy to make sure your retirement savings stay on track. If you have an old 401(k) sitting around, we can help you bring it into a plan that actually fits your goals.

Ready to review your retirement accounts to see which option is best for you? Contact us today!