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What to do with your 401(k) after leaving a job

Your four choices, why cashing out costs so much, direct rollovers, loans and vesting, fees and beneficiaries, and finding lost accounts.

Quick answer

Your 401(k) is still yours. You can leave it in the old plan, move it to a new employer’s plan, roll it into an IRA, or cash it out. Cashing out usually means income tax and, if you’re under 59½, a 10% penalty. If you move it, use a direct rollover so the money goes straight to the new account. Check any 401(k) loan, whether the employer match is vested, fees and beneficiaries, and keep track of old accounts.

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Your checklist

  • Know it’s still your money
  • Leave it, move it, or roll to an IRA
  • Avoid cashing out if you can
  • Use a direct rollover
  • Check loans, vesting, fees and beneficiaries
  • Keep track of old accounts

Rather read it? Here’s the whole thing.

Your choices

1. Leave it in the old plan, if the plan allows (small balances may be moved or cashed out automatically). 2. Move it to your new employer’s plan, if it accepts rollovers. 3. Roll it into an IRA you open at a bank or brokerage. 4. Cash it out.

Why cashing out hurts

You’ll owe income tax on the money, and if you’re under 59½, usually a 10% penalty (with some exceptions, like leaving a job in or after the year you turn 55). You also lose future growth.

Moving it the right way

Ask for a direct rollover, where the money goes straight to the new plan or IRA. If a check is made out to you, 20% may be withheld for taxes and you’ll have 60 days to deposit the full amount to avoid taxes.

Check the details

  • 401(k) loans: an unpaid loan may come due or be treated as a taxable withdrawal. Ask about repayment deadlines.
  • Vesting: your contributions are always yours; employer contributions may require years of service.
  • Fees and investments: compare before choosing.
  • Beneficiaries: keep them current.

Old accounts

Keep your address updated with old plans. The Department of Labor’s Retirement Savings Lost and Found tool can help locate forgotten accounts.

Official sources, and where to look

To find your local office, search for:

  • direct rollover 401k to IRA
  • IRS early withdrawal penalty exceptions

Pick sites that end in .gov. Official forms are almost always free.

Common questions

Do I have to move my 401(k) when I leave a job?

Not always. Many plans let you leave it if the balance is above a certain amount. Compare fees and options first. More ›

Can I use my 401(k) if I’m out of work and need money?

You can, but taxes and penalties often apply. Check unemployment, emergency savings and other options first, and get advice. More ›

What happens to my 401(k) when I quit or get laid off?

It stays yours. You can usually leave it, move it to a new employer plan, roll it into an IRA, or cash it out. More ›

How much will I lose if I cash out my 401(k)?

You’ll owe income tax, and usually a 10% penalty if you’re under 59½, plus you lose future growth. The total hit can be large. More ›

What is a direct rollover?

Moving money straight from your old plan to a new plan or IRA without a check made out to you, which avoids tax withholding and deadline risks. More ›

What happens to my 401(k) loan if I leave my job?

It may come due. If not repaid by the deadline, the unpaid amount can be treated as a taxable distribution. More ›

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Not yet reviewed by an expert. Last checked 2026-10-29. This is general help, not legal, medical or professional advice. Rules are different in every state.