Ask Stacy: Should I Leave My 401(k) With an Old Employer or Roll It Over?

401K
Photo by Andrey_Popov / Shutterstock.com

Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about what to do with your 401(k) when you change jobs. You’ve got several options, including:

  • Cashing it out
  • Leaving it with your former employer
  • Transferring it to your new employer’s 401(k)
  • Rolling it into a self-directed IRA

Unless you absolutely have to, forget about cashing it out. Do that, and you’ll pay taxes on the withdrawal and — unless you’re over 59 and a half — a 10 percent penalty to boot. Bad move.

As for the other options? Watch the following one-minute video for my take. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information on this topic, check out “Have a New Job? What to Do With Your Old 401(k)” and “Of All the Fees You Pay, This Is the Worst.” You can also go to the search at the top of this page, put in the term “401(k)” and find plenty of information on just about everything relating to this topic.

Also, remember that if you need anything from a better credit card to help with debt, you’ll find it in our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, everyone, and welcome to the one-minute money manager. I’m Stacy Johnson. You ask me any money question, and I’ll answer it in less than a minute.

Here’s today question. It comes from Alena:

“I currently have a 401(k) through my employer. I plan to go to another job where it’s not offered. Should I move it to an IRA or leave it where it is?”

The answer to this question is going to depend on lots of things. But basically if you like your performance where it is and if the fees you’re paying with your current employer are low, leave it alone. There’s no rush to do anything.

On the other hand, if you want more investment options than those offered in your current plan, you might want to roll to an individual retirement account, or IRA. Before you do that, however, check out your investment options. While IRAs typically allow you to invest in almost anything, you may have trouble finding a safe, guaranteed option that you’ll often find in some 401(k)s.

Also important: If you roll your 401(k) into an IRA that’s held at a traditional investment firm, beware of commissioned financial advisers. They may want you to move your money around more than necessary to generate commissions for themselves. I’m no fan of commissioned salespeople, especially the investment kind.

Bottom line? Check your performance of your existing plan and check the fees you’re paying. If you’re happy, stick with it. If you want more flexibility, roll it to an IRA. But don’t do it because some salesman is pressuring you to do so.

Thanks, folks. See you soon!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Got more money questions? Browse lots more Ask Stacy answers here.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
10 Cars That Lose the Most Resale Value After 5 Years
10 Cars That Lose the Most Resale Value After 5 Years

Two types of vehicles are especially likely to see steep plunges in value.

5 Ways to Save up $500,000 in 15 Years
5 Ways to Save up $500,000 in 15 Years

Even if you’re behind in preparing for retirement, there’s still a way to pull together a solid nest egg if you focus.

70% of Older Adults Botch This Basic Retirement Question
70% of Older Adults Botch This Basic Retirement Question

Can you answer this fundamental retirement income question?

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

9 Houseplants That Remove Toxins From Your Indoor Air
9 Houseplants That Remove Toxins From Your Indoor Air

These plants may also do everything from reduce the amount of dust in your home to improve your productivity.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.