facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
What Should I Do with My Old 401K When I Change Jobs? (Updated Aug. 2023) Thumbnail

What Should I Do with My Old 401K When I Change Jobs? (Updated Aug. 2023)

Retirement Funding Insights

What Should I Do with My Old 401K When I Change Jobs?

Topics: 401K, Solo 401K, Individual Retirement Account (IRA), 403B, 457B

Have you changed jobs recently? Or maybe several times in your career? Well that’s all pretty normal. People change jobs A LOT! Usually more than 10 times during a career! So, if you’ve been in the workforce more than a couple years, it’s likely that you’ve changed jobs. Or maybe you left an employer to raise kids full time. If you left a job, did your money move with you? If not, do you know where your money is? Or how it’s invested?

If you don’t know the answers, you aren’t alone – some estimates quoted about 33,000 abandoned 401K accounts every year, worth as much as $250 million! (For our purposes, 401Ks, 403Bs and 457Bs are generally treated the same in terms of rolling over funds.) Just for fun, let’s assume you managed to save $10,000 in a 401K while working a few years. Then you decide to change employers and forget about your money. What might that $10,000 have grown to? Well if invested in low-cost index funds and properly diversified for the last 10 years, it could be worth $35,000-$40,000! Of course, it could be invested in the stock of the company you worked for, cash, bonds, or some high-cost, poor performing mutual fund. It could be not diversified, underperforming and costing you additional fees!

You really have 4 options with your 401K when you leave your job:

  1. Cashing out
  2. Do nothing (Keep it with your previous employer)
  3. Roll it over to your new employer’s plan
  4. Roll it over into an Individual Retirement Account (IRA)

If you have changed jobs and stranded retirement savings, near-term action is likely in your best interest to maximize your future benefit. However, when moving money be cautious as mistakes can be costly in terms of taxes and penalties. Being organized in your financial planning today is likely the best scenario for your future, and I would encourage you to consult a professional to make sure you choose the best option. Before we dive deeper into the 4 options:

  • Questions on retirement or other financial goals? Email me: matt@mhb-advisory.com.
  • Do you need a CFO for your Household? We can help. Check out Our Services.
  • Curious about your net worth or ready to start your Financial Plan? You can create your own Right Capital login.

On a personal note

Prior to realizing the need for and having the ability to start my own business, I worked at 5 different places where I saved into a 401K plan. Thus, I’ve rolled over numerous old 401Ks to new IRAs, and most recently after becoming self-employed I rolled over an old IRA and my latest 401K account into my new Solo 401K, which I now manage at my Custodian, Altruist. This situation now is so much easier to manage in terms of trading and for the benefit of proper asset allocation. In case you missed it, I actually wrote about the Solo 401K in an updated post from a few months ago (Why is the Solo 401K the Best Asset Management Tool for Real Estate Agents?), and although the post highlights Realtors, its geared toward all self-employed, Independent Contractors.

Onto the 4 options for your 401K

Cashing out

Taking a cash distribution from your 401K is generally not a favored strategy. If you take a distribution, not only will you be taxed at your ordinary income tax rate, you will also face a 10% penalty if you are younger than 59.5 years old. So, a $50,000 401K becomes $33,000 ($50,000 - $12,000 for taxes - $5,000 penalty) for an individual in the 24% tax bracket. And that doesn’t factor in state taxes. Plus, you’re taking away from your future self and potentially prolonging retirement/financial independence.

However, in the case of a dire need for cash or significant financial distress, this could be an option. I recently read a CNN story that suggested hardship 401K withdrawals are rapidly on the rise as consumers battle high cost of living. If you are considering withdrawing cash, I would also encourage you to check out our earlier post (How Do I Get Out of Credit Card Debt and Start a Budget?), and focus on saving money specifically for emergencies. Perhaps your 401K has a very low dollar amount ($5,000 or less) saved from your first job and you have decades left to save for retirement. It may not be worth the trouble to roll over though your old employer may do it for you to remove your account from their administration. If your account is less than $1,000, your old employer will likely pay it out to you (though you could still roll it over if done within 60 days).

Do nothing (Keep it with your previous employer)

Admittedly, this is not the worst option, but certainly not ideal as you would be more likely to forget this account exists or leave it out of your asset allocation and future financial planning going forward. Furthermore, your old employer may charge you administrative fees, and you remain stuck with their investment options. If your old employer’s plan has multiple diverse, low-cost investment options and you don’t plan on contributing to your new employer’s plan (or they don’t have one) for whatever reason, then this strategy might make sense. But then what to do with future contributions?

Roll it over into your new employer’s plan

The benefit of rolling over to your new employer’s plan is quite simply for the sake of consolidation. However, it may not be possible to put old employer funds into your new employer’s program, and again you would be limited to the new plan’s broker and investment choices, which may not be adequate for your investment needs.

Roll it over into an IRA

Lastly, you can open a new account with a broad range of brokers and roll over your 401K into an IRA. This option would likely offer the most diversification and investment options, as well as allowing future contributions if 401K choices were either unavailable, inappropriate or maxed out (at $22,500 for 2023). Of note, federal law generally offers more protection to 401K plans than IRAs, but can vary by state, and the benefit of flexibility, investment choices, ability to invest more dollars and lower your expenses may outweigh any creditor protection risks.

In closing, be mindful of the risk of moving money improperly (taxes and penalties) or sacrificing your future for the benefit of today. While you generally don’t have to decide quickly, your best option is to incorporate all your retirement savings into a single investment strategy (even if that’s across multiple brokers). In the event you do receive a distribution directly, you will need to act quickly, as you have 60 days to roll it over to another plan/IRA.


Please check out my blog posts for more financial topics:

Why Should I Use a Financial Advisor for Asset Management?

How Do I Get Out of Credit Card Debt and Start a Budget?

Are Maximum 401K Contributions Best for My Asset Management Strategy?

Should I Pay Off My Mortgage Early?

How Can Effective Asset Management Help Me Reach Financial Independence?

How Much Money Do I Need to Save for Retirement?

How Much Should I Save for College?

Why Should a Small Business Owner Have a 401K Plan and What Are the Best Savings Options?

What Financial Advisor Qualities Can Enhance Overall Asset Management?

Best (Most Read) MHB Advisory Blogs of 2019!

Why is the Solo 401K the Best Asset Management Tool for Real Estate Agents?

If you or someone you know has any financial-related questions, I would love to have a conversation, so please feel free to reach out: matt@mhb-advisory.com.

And stay tuned for additional blog posts on retirement savings and other topics.

Best wishes on your financial path!



This post was created by Matt Beeby, the Founder of MHB Advisory Services. Matt has been working in Financial Services and investing in real estate since 2005, though his investment experience spans nearly two decades. He is a Christ follower, active in both his church and his neighborhood association. Matt enjoys sports and family time. Read more about Matt on his website bio.


  • Disclosures:
  • Information contained in this document is for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any product or security.
  • This information is believed to be accurate and should not be considered tax or legal advice.
  • Please consult tax or legal professionals for such advice and be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed.
  • Investments involve risk and are not guaranteed to appreciate, and past performance is not indicative of future results.
  • Additional information including our privacy policy and Form ADV are available on request or can be found on our website: mhb-advisory.com.












Photos: https://unsplash.com