401(k) Rollovers
Changing Jobs? Don’t Abandon Your Old Retirement Plan
Switching jobs can be both exciting and overwhelming. Amid new responsibilities, benefits decisions, and setting up contributions to a new retirement plan, it’s easy to overlook your previous employer’s retirement plan. However, what you do with that account can have lasting implications for your financial future. Whether you’re preparing to leave a job or just starting a new one, it’s important to understand your retirement plan options. You typically have four choices, each with its own trade-offs.
What to Do with Your Previous Retirement Plan?
|
Option
|
Key Advantages
|
Potential Drawbacks
|
|---|---|---|
|
Leave account with your former employer
|
• Tax-advantaged growth continues
• No immediate action required • No taxes or penalties as long as assets remain in the plan |
• Can’t make new contributions
• Limited investment options • Possible higher fees • Another account to keep track of • Harder to coordinate investment strategy • Low balances may be forced out |
|
Roll it to a new employer’s plan
|
• Simplifies visibility by consolidating retirement accounts
• Maintains tax-advantaged growth • No taxes or penalties if done as a direct rollover • May allow loans or other plan features |
• Some employer plans don’t accept rollovers
• Limited investment options and flexibility compared to IRA |
|
Roll it to an IRA
|
• Greater control and flexibility
• Broader investment options • No taxes or penalties if done as a direct rollover (Roth IRA conversions may be taxable) |
• Requires more hands on decision making
• Another account to manage/coordinate alongside other retirement investments |
|
Cash it out
|
• Immediate access to funds
|
• Reduces retirement savings immediately
• Generally subject to income tax plus 10% early withdrawal penalty if under age 59½ • Sacrifices future tax-advantaged growth |
Did You Know
As of 2025, there were approximately 31.9 million left-behind or forgotten retirement accounts, exceeding $2 trillion in assets—with an average balance of $66,691. 1
Do you have forgotten retirement funds floating around? Find out using the Employee Benefits Security Administration’s Lost and Found Database.
Why 401(k) Rollovers Matter
Chances are this won’t be the only time you’re faced with a rollover decision. Research suggests that the typical U.S. worker will have nine employers over the course of their career, increasing the chances of fragmented accounts and missed opportunities. Repeated job changes—combined with inconsistent savings decisions—can reduce lifetime retirement savings by as much as $300,000 for a middle income worker. 2
A more strategic approach to managing your retirement accounts can help you reach your goals much faster.
When in Doubt, Don’t Guess
Not sure which option is best for you? Take time to think it through. A hasty or uninformed decision could have serious repercussions that erode your savings and delay your retirement.
Making the right choice for your retirement savings means carefully considering your long term goals, tax outlook, and desire for simplicity or control. Weighing fees, investment flexibility, and how actively you want to manage your accounts can help ensure your decision supports your broader retirement strategy.
Receive an independent fiduciary review with Fisher\SMB to obtain an objective third-party fund lineup assessment and documentation for your fiduciary audit file.
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