I Changed Jobs. What Should I Do With My Employer Sponsored Retirement Plan?

Last Updated: January 12, 2026

5 minutes read

Changing jobs is exciting, but it also comes with a handful of financial housekeeping tasks. One of the biggest I’ve experienced?

Deciding what to do with your old employer-sponsored retirement plan (usually a 401(k) or 403(b)).

The good news is that there are plenty of options, and some of them can really set you up for long-term success.

After dealing with this multiple times in my career journey, I want to break it down in a simple, practical way.

Why This Even Matters

When you leave a job, your retirement savings don’t disappear, but you do need to decide what happens next.

A smart move here can mean:

Lower fees
Better investment choices
Simplified finances
More control over your money

A bad move? It can cost you thousands in taxes or penalties.

So let’s walk through your four main options.

Option 1: Leave the Money Where It Is

Leaving the funds where they are is a valid option.

Most employers let you leave your 401(k) exactly where it’s at as long as you have over $5,000 saved.

Pros:

Zero effort
Your investments can stay where they are
Avoids any immediate tax or paperwork issues

Cons:

You can’t contribute anymore
Your investment choices may be limited
Old plans often have higher fees
You now have scattered accounts to keep track of

When it makes sense:

If your old plan has excellent investment options and low fees. This is rare but it can happen.

Option 2: Move the Money to Your New Employer’s Plan

A rollover into your new 401(k) can keep everything tidy and consolidated.

Pros:

Keeps your retirement money in one place
Easy to manage
Some employer plans offer great institutional funds
Still protected by ERISA (strong legal protections)

Cons:

Not all plans accept rollovers
Your new plan may not have good investment choices
Might have higher fees than an IRA

When it makes sense:

If your new plan is strong and you prefer simplicity. It also may make more sense if the new plan is from a large provider such as Fidelity or Vanguard as these providers are able to offer a wide variety of low cost funds.

Things to consider:

When rolling the funds into your new employers plan, its important to make sure this process is done correctly. If not, you can incur penalties and fees as if it were a distribution. The current rule allows for 60 days from when you pull the money out of the previous plan to deposit it into the new employers plan before it is considered a standard distribution.

I have rolled over prior employer 401k and simple IRA’s a few times and I’ve run into issues with it. When initiating the rollover, the retirement management company will typically mail the check to the new retirement benefits company. I’ve had my new 401k provider reject the check because I did not fill out an application form despite having the correct account number, plan name, and details on the check. The new provider company destroyed the check and I had to get in contact with the prior provider to have them resend a check to me directly. I then called the new provider with the check and performed the deposit.

After this experience, I now prefer to have checks sent directly to me rather than to the benefits provider. I can make sure to properly deposit the funds into my new account within the 60 day window.

Option 3: Roll It Over Into an IRA (Most Flexible)

This is the most popular choice because it gives you the greatest control.

Pros:

Unlimited investment choices (index funds, ETFs, REITs, bonds, etc.)
Usually lower fees
You control the custodian (Fidelity, Vanguard, Schwab, etc.)
Keeps money growing tax-deferred
Very easy to manage over time

Cons:

Slightly more “hands-on” than a 401(k)
Some people prefer workplace plans for the built-in structure

When it makes sense:

If you want flexibility, low cost, and full control, this is usually the winner.

Things to consider:

Rolling over a 401k, 403b, Simple IRA, or other retirement account into a rollover IRA can create a small problem when looking at the IRS rules. There are yearly contribution limits to Roth IRA’s and Traditional IRA’s. An individual cannot put the maximum amount into each account, the total between the two accounts must not exceed some value, which is $7,500 in 2026. If someone is over the Roth IRA income limit and wants to contribute to a traditional IRA and perform a back-door Roth contribution, the pro-rata rule would apply. This means taxes would need to be taken out when the account is converted from traditional to Roth.

Option 4: Cash It Out (Generally a Bad Idea)

Yes… you can cash it out. But should you? The answer is almost always never.

Here’s what happens:

You’ll pay taxes on the withdrawal
If you’re under 59½, you’ll also owe a 10% penalty
You lose future tax-advantaged growth
You’re likely robbing future you of a huge amount of money

Example:

Cashing out $10,000 today could cost you over $100,000 in lost future growth.

When it makes sense:

Rarely unless maybe in a true emergency where you have no other options.

So Which Option Should You Choose?

Here’s a quick cheat sheet:

You want simplicity → Roll into your new employer plan
You want more investment choices → Roll into an IRA
You loved your old plan → Leave it
You need money immediately → Cash out (but expect taxes + penalties)

How to Actually Do a Rollover (Step-by-Step)

If you choose either IRA or new 401(k), the process is painless.

1. Open the account (IRA or new 401(k))

If you choose IRA, pick a custodian like:

Vanguard
Fidelity
Schwab

These accounts might be referred to as traditional IRA or rollover IRA depending on the platform.

2. Call your old plan administrator or follow the online procedure.

Ask for a direct rollover.

Do not ask for a distribution as this will trigger taxes. Usually, the term distribution means take money out of the account which is what you do not want to do. Rollover or move to another plan are two options you want to look for.

3. Funds get transferred directly

This can be done via check made out to your new custodian or sometimes electronically. When filing out the online form or speaking with customer support, they will typically request the name, Attn., address, and account number at the financial institution the funds will be transferred to. Many providers have this info of where to send checks posted on their website.

4. Choose your investments

This is the step many people skip. Don’t leave the money sitting in cash. The account has the funds in it but it is not yet invested after the transfer. Buy shares of the desired funds in the new account.

If you’re unsure, many people choose a simple 3-fund portfolio or a target-date retirement fund. Broad market funds with little or no expense ratios usually are a great choice.

Mistakes to Avoid

❌ Taking a check made out to you personally

→ Automatically withholds 20% for taxes.

❌ Leaving money in multiple old 401(k)s

→ Harder to track, easier to ignore, often more expensive.

❌ Investing too conservatively just because you’re switching jobs

→ Keep your long-term plan consistent.

You generally have 60 days from the date you receive a 401(k) distribution (like a check made out to you) to roll it into an IRA or your new employer’s plan to avoid taxes and penalties; otherwise, it’s treated as a taxable withdrawal.