What Should I Do With My 401(k) From My Old Company?

Changing jobs often means leaving more than just your old desk behind. If you participated in your former employer’s 401(k) plan, you’re now faced with a decision: what should you do with that account?

It’s an important question—one that affects how you manage your retirement savings, your investment options, and potentially your tax situation. In this article, we’ll walk through the four main options for handling an old 401(k), along with the pros, cons, and planning considerations for each.

Option 1: Leave It Where It Is

Most employers allow former employees to leave their 401(k) accounts in the plan, provided the balance exceeds a minimum threshold (usually $7,000).

Pros

• No immediate action required

• Maintains investment options

• Any growth in the account will continue to be tax-deferred

Cons

• Potentially limited investment options compared to IRAs

• Plan fees may be higher than alternatives

• Harder to manage if you accumulate multiple old accounts

When It Makes Sense
If the old plan has strong investment options and low fees—or if you’re not ready to make a rollover decision—this can be a suitable temporary solution.

Option 2: Roll It Over to Your New Employer’s 401(k)

If your new employer offers a 401(k), you may be able to consolidate your old account into the new one.

Pros

• Simplifies your retirement accounts

• Keeps funds in a tax-advantaged account

• May offer access to institutional fund pricing

• Allows loans (if the new plan permits)

Cons

• New plan may also have limited investment choices

• Rollovers can take time and paperwork

• Not all plans accept incoming rollovers

When It Makes Sense: If your new plan is well-managed and offers solid investment options and service, this can be a good way to consolidate and simplify your financial life.

Option 3: Roll It Over to an IRA

This is often the most flexible option for those who want greater control over their investments and potentially lower overall fees.

Pros

• Broad range of investment choices

• Can consolidate multiple old accounts into one

• Often lower fees than 401(k) plans

• More flexibility with withdrawal and Roth conversion strategies

Cons

• Cannot take a loan from an IRA

• Creditor protections may be weaker than in a 401(k), depending on your state

When It Makes Sense: If you’re comfortable managing your investments or working with a financial advisor, rolling into an IRA allows for more customization and control—especially when building a tax-efficient retirement income plan.

Option 4: Cash It Out

You always have the option to take the money and run—but doing so comes at a steep cost.

Pros

• Provides immediate access to funds

• Simple and final

Cons

• Subject to income taxes

• 10% early withdrawal penalty if under age 59½

• Permanently reduces your retirement savings

When It Makes Sense: Rarely. This is generally a last resort option, appropriate only in cases of financial emergency or if the balance is very small.

Additional Considerations

Check for Roth balances
Some plans allow Roth 401(k) contributions. If you have both pre-tax and Roth dollars, each portion must be rolled over correctly—to a Traditional IRA and Roth IRA respectively.

Watch for employer stock
If your 401(k) includes company stock, you may be eligible for Net Unrealized Appreciation (NUA) treatment, a tax strategy worth exploring with a professional.

Don’t miss the deadline
If you request a check and don’t complete a rollover within 60 days, it’s considered a distribution and taxed accordingly.

Final Thoughts

If you’ve left a job and have an old 401(k) sitting idle, now is the time to make a plan. Whether you leave it where it is, roll it over to your new plan or IRA, or—less ideally—cash it out, the decision should align with your long-term retirement goals, risk tolerance, and tax strategy.

In many cases, rolling the balance into an IRA offers the most flexibility, especially for those interested in managing taxes, investment choices, and future retirement withdrawals. If you're unsure which route is best, a financial advisor can help evaluate your options based on your full financial picture.

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.