One of the most important financial plans you’ll ever make is the one you create for retirement. If you are participating in a 401(k) plan with your employer, you’re off to a good start. However, if you are out of a job or starting a new one, you have options when considering a 401(k) rollover. Here are three things to think about.

Stay put

You can leave your money in the 401(k) plan with your previous employer as long as you have a certain amount in the account, as stipulated by the plan. It makes sense to do this if the company is large and has institutional funds that aren’t readily available to individual investors. These funds are usually offered only to large companies with many assets.

Staying put also is a good choice if your plan allows you to borrow. Because the distribution is not taxed, as long as you pay it back, it works as a good emergency fund.

However, you will not be able to contribute to the 401(k) if you leave it behind, and you’ll probably still be responsible for paying standard fees that accompany the plan.


An IRA lets you control your money without the limits of leaving it in an old 401(k). A direct rollover 401(k) into an IRA puts the money straight into your new account, and it offers flexibility to invest in individual stocks, bonds or other vehicles that might not be available in a 401(k).

Money in an IRA can be withdrawn for educational expenses without early withdrawal penalties, but you’ll still have to pay taxes on that money. If you withdraw early from a 401(k), you’ll be charged penalties.

Roll into a new 401(k)

If your current employer offers a 401(k), you can roll your old plan into that new one. Find out if your company will activate the rollover on your first day of work. If not, you’ll have to figure out how to manage your savings until you can contribute. Check out the plan thoroughly to learn how it differs from your old 401(k).