What to do with an old 401(k)

What to do with an old 401(k)

If you've left a job, your 401(k) from that employer is still yours. You have options, and the right choice depends on your other accounts, retirement timeline, and the fees and investment choices in the old plan or in any rollover option. This overview is general information—not personalized financial advice. Consider speaking with a financial advisor before making changes.

Common options for an old 401(k)

• Leave it with your former employer (if allowed). Pros: minimal action; Cons: may have limited investment options and higher or unknown fees; monitor plan rules about access and distributions.

• Roll over to your new employer’s 401(k) (if available). Pros: consolidate accounts, simplify tracking; Cons: your new plan's options and fees may be better or worse; ensure you do a direct rollover.

• Roll over to an individual retirement account (IRA) (Traditional or Roth). Pros: broader investment choices; more control; potentially lower fees. Cons: transfer process; tax implications if converting to Roth or taking distributions early.

• Cash out (withdraw funds). This is generally discouraged because you’ll owe income tax on the distribution, plus a possible early withdrawal penalty if you’re under the age limit.

Fees and investment choices

Compare the old plan’s ongoing costs with the options you’d get in a rollover. High fees can erode savings over time, especially for long retirement horizons. Look at the fund lineup, expense ratios, and any fee waivers or minimum balances.

Tax considerations and distributions

Traditional 401(k) contributions are typically tax-deferred; you pay taxes when you withdraw. Rolling over to another tax-advantaged account (like a Traditional IRA or another 401(k)) can preserve tax deferral. If you convert to a Roth account, you'll pay taxes on the amount converted in the year of the rollover. RMDs apply to traditional accounts after a certain age; check current rules and plan details.

Next steps and tips

• Gather plan documents and beneficiary information.
• Check whether the old plan is still open to new contributions or only to distributions.
• Decide whether you want to consolidate accounts and choose a rollover path.
• If you’re unsure, contact your former HR department or a financial advisor for guidance.