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

When you leave your job, should you take your 401(k) plan with you or leave it with your old employer? Here's how to decide.

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

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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.

Stacy Johnson
Stacy Johnson @moneytalksnews
I'm the founder of Money Talks News and have spent the last 40+ years in the personal finance trenches. I'm a CPA, author of a few books and multiple Emmy recipient. I'm ... More

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