Things to consider before rolling over an IRA
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"If you roll the money into an IRA and then you die, your nonspouse beneficiary cannot make a Roth IRA conversion from that money," says James Lange, CPA, attorney and author of "Retire Secure! Pay Taxes Later."

Mini-lesson: If you convert tax-deferred assets to a Roth IRA, you have to pay income taxes upfront, but then your money grows tax free and you pay no taxes when you begin taking distributions. Conversely, with a traditional IRA, you get a tax break upfront, your money grows tax free and you pay taxes at ordinary rates upon withdrawal.

Lange says Roth IRAs are typically better for heirs because they receive income-tax-free distributions over their entire lives and, unlike traditional IRAs, Roths are not subject to the minimum distribution rules that require withdrawals beginning at age 70½.

If you subscribe to the "pay taxes later, rather than sooner" philosophy, it also makes sense to leave money in a former employer's 401(k) plan when naming nonspouse beneficiaries so that your beneficiaries can elect to stretch payments over their lifetimes. To get this benefit, the beneficiary must roll the proceeds over into a properly titled inherited IRA -- but this only works if your 401(k) administrator permits this transaction.

Lange cites another advantage to leaving money in a former employer's 401(k) plan: Some older company plans offer a fixed-income fund called a guaranteed income contract, or GIC, with a better-than-average yield.

"The GIC will often pay more than a comparable security with equal safety than what you can get on the market," Lange says. "If for no other reason, it's because sometimes the GIC has been around for a long time and they still have bond and other fixed income instruments that are paying a lot more than the ones are today."

Another consideration: Individuals in especially litigious fields, such as physicians and attorneys, sometimes prefer to shelter part of their investments in 401(k) plans because they have more federal protections than IRAs. For example, IRA assets are shielded from creditors in cases of bankruptcy, but may not be for other types of judgments such as civil lawsuits.

"This is really for people who are ultra-high risk, where every tiny bit of asset protection helps," says Michael Kitces, Certified Financial Planner and director of financial planning at Pinnacle Advisory Group in Columbia, Md.

Don't take a cash distribution
Experts say it's generally not a good idea to take a distribution from your retirement plan. You'll have to pay taxes and usually a penalty besides, and you won't have that money earning compound returns for your retirement.

"For the vast majority of people who take a cash distribution, it never makes it into the qualified account," says Nora Peterson, author of "Retire Rich with Your Self-Directed IRA."

"They end up diverting the money to some other use."