Managing Your 401(k) After a Job Change: 3 Smart Options

May 9, 2026, 6:00 a.m. ET

If you're switching jobs, you're in good company. The average American worker changes employers approximately once every four years.

One of the last things on your mind as you make the switch may be what to do with your 401(k). However, it's important to make a decision that will serve you well in the long term.

Option 1: Leave it where it is

On a rare occasion, you may find an employer who prefers that former employees move their 401(k)s. However, that's not the norm. Most employers are happy to allow you to keep your money in their plan indefinitely. Here are some of the advantages associated with leaving your account where it is:

• It's simple: There's no need to take action.
• Creditor protection: If you're considering rolling the 401(k) to another plan type, it's important to remember that 401(k)s typically offer stronger creditor protection than other retirement accounts.

Option 2: Roll it over to a new employer's 401(k)

Not all employers will accept a rollover from a previous employer's plan, but most will. If that's the case with your new employer, rolling a 401(k) over is a relatively simple process. There are two types of rollovers: direct and indirect. As the name implies, a direct rollover moves funds directly from your old plan administrator to your new plan administrator.

An indirect rollover involves sending the funds to you, minus a mandatory 20% tax withholding. You then have 60 days to redeposit the full amount into the new account to avoid taxes and a possible 10% penalty. It is rarely the best option.

Advantages of rolling the account over to a new employer include:

• Consolidation: By rolling the account to the new employer, you keep your retirement savings in one place.
• Simplified RMDs: While retirement may be years away, required minimum distributions (RMDs) will become due around age 75. Having just one retirement account from which to draw simplifies the bookkeeping involved in RMDs.

Option 3: Roll it over to an IRA

One advantage of moving your money to an IRA is that IRAs typically provide a broader range of investment options and often carry lower fees. Again, the risk-free way to roll the money over is through a direct transfer. That way, you don't have to worry about missing the 60-day deadline to complete the rollover yourself.

Rolling 401(k) proceeds over to an IRA offers other advantages, such as:

• It's all in one place: Rolling all of your retirement accounts to a single IRA makes it easy to keep track of how your portfolio is doing.
• Estate planning: IRAs provide significant flexibility in naming beneficiaries. For example, you can name both primary and contingent beneficiaries, charities or a trust. Just as attractive, you can easily change those beneficiaries at any time.
• Professional management: While a 401(k) may seem "hands off," it's possible to get up close and personal with an IRA. It's easy to work with a financial advisor who's part of the brokerage's professional management team and let your preferences be known.

If you're worried about what to do with the funds in your 401(k), take a beat. You don't have to decide this week, or even this year. There is no IRS-mandated deadline to make a move. If your 401(k) is doing well with your previous employer, give yourself time to make a decision you'll be happy with.

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