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What to Do with Your 401(k) When You Get a New Job

If you’re starting a new job, congratulations! But what should you do with your old employer’s retirement plan?

Four Choices

When you leave your old job, you have four choices for your 401(k):

  1. Cash it out
  2. Do nothing
  3. Move it to your new employer
  4. Roll it over into an individual retirement account (IRA)
Cashing Out

Cashing out your 401(k) before you’re 59 and a half years old will result in a 10% penalty and income tax on the amount. It’s best to avoid this option if possible.

Doing Nothing

You can leave your 401(k) with your old employer if they permit it. This may be a good option if you like the choices in that retirement plan and can keep track of it. However, it’s easy to forget about it if you just leave it at your old employer.

Moving to Your New Employer

If your new employer permits it, you can move your 401(k) to your new employer. This can be a seamless process, and you can keep all your retirement savings in one place. However, you should make sure you like the options in the new retirement plan.

Rolling Over into an IRA

Most people are encouraged to roll over their 401(k) into an IRA with a financial institution. This gives you more control over your investments and allows you to choose what you want to invest in. However, there are some things to consider before making this decision.


According to a study by the Pew Charitable Trust, keeping your retirement money in an employer fund is less expensive in terms of fees than what you’ll pay in an IRA account.

This is because employer funds can get cheaper, institutional fees, while IRA accounts charge retail fees. While the difference may not seem like much, it can add up over time.


In conclusion, when you get a new job, you have several options for your 401(k). You can cash it out, leave it with your old employer, move it to your new employer, or roll it over into an IRA. Each option has its pros and cons, and it’s essential to consider the fees associated with each option.

Do you think the benefits of having more control over your investments in an IRA outweigh the higher fees? Why or why not?


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