"(Former employees) tend to move on," says Charlotte Dougherty, a Certified Financial Planner in Cincinnati, Ohio. "They tend to not pay attention to how their plan assets are invested, and they lose control of that bucket of money."
In some cases, though, leaving the money where it is might make sense, says Daniel Galli, a Certified Financial Planner in Norwell, Mass.
"If there is no need to access the money, the first step somebody should do is to take a look at the employer plan," Galli says.
A large employer may have a plan that, because of the size of its assets, has access to low-cost "institutional" funds that may not be available to individual investors. "They could buy a fund of the same name (in an IRA, for example), but it will have a higher expense ratio," Galli says.
While Galli sees several potential advantages to this option, Patrick Astre maintains there's usually only one good reason to leave your retirement funds behind when you separate from your job. If your 401(k) allows you to borrow from it, letting it stay in place can provide you with a backup when your cash starts running low. Unlike a cash out, the distribution for a loan is not taxed, as long as you repay the money. "But not all plans have that (option)," says Astre, a Certified Financial Planner in Shoreham, New York.