Changing jobs can be an exciting time. Whether it’s for career growth, better work-life balance, or a new industry, there’s a lot to think about—negotiating your salary, adjusting to a new workplace, and learning new processes. But one question that often gets overlooked during this transition is, “What should I do with my 401(k)?”
If you have a 401(k) account from your current employer, figuring out the next steps can feel daunting. But don't worry—this guide will walk you through your options so you can make a decision that best supports your financial future. Plus, we’ll advise you on when to consult with a financial advisor to nail down the right strategy for your unique situation.
When you leave a job, your 401(k) retirement account doesn’t automatically disappear—it’s still your money. However, what happens next can vary depending on your employer's policies and the decisions you make. Some companies may allow you to leave it as is, while others may require you to act sooner rather than later, especially if your balance is below a certain amount (usually $5,000).
The good news? You have several options to consider, and each comes with its own pros and cons.
The simplest option is to leave your 401(k) with your old employer’s plan—if their policy allows it. This is typically referred to as maintaining an “orphan 401(k).”
When to Consider This Option
If your 401(k) plan offers excellent investment options and low fees, you may opt to leave it as is. Just ensure you stay on top of it—don’t lose track over time.
Most employers allow you to transfer your old 401(k) balance into your new employer’s plan once you start.
When to Consider This Option
If your new employer offers a strong 401(k) plan and you want an all-in-one account, rolling over could be ideal.
Pro Tip: Ask your new employer’s HR team about fees and investment options before making a decision.
Instead of moving your funds to another 401(k), you can roll them over into an Individual Retirement Account (IRA).
When to Consider This Option
This is a great choice if you value flexibility and want more investment options. However, rolling over to an IRA may come with tax implications, so it’s best to consult a financial advisor.
You also have the option to cash out your 401(k) and withdraw the funds as a lump sum. But here’s why you shouldn’t rush into this decision:
When to Consider This Option
This should only be considered in extreme financial emergencies. Even then, speak with a financial professional about potential alternatives before cashing out.
Here are some tips to help you decide how to manage your 401(k) when switching jobs:
Check account fees, investment options, and employer policies to determine if it's worth keeping.
Ask your HR team for detailed information about the new 401(k) plan. Look for match opportunities, fee structures, and investment diversity.
Think about your retirement timeline, risk tolerance, and investment preferences.
If you’re feeling unsure or overwhelmed, consulting with a financial advisor is a smart move. They can help guide you toward a decision that aligns with your long-term financial goals and handle the paperwork.
You typically have time to decide what to do with your 401(k). Take the time to evaluate your options.
Switching jobs is a significant transition, and a 401(k) decision often gets overlooked. By understanding your options and aligning them with your financial goals, you can make a smart move that strengthens your future.
If you’re still unsure about the best course of action, connect with a financial advisor today. They can tailor advice to your personal situation, ensuring your decision works for you both now and in retirement.
Make your 401(k) work smarter—your future self will thank you.