What Happens to Your 401(k) When You Leave a Job

Your options and deadlines when changing employers

When you leave a job, you have several options for your 401(k): roll it over to a new employer plan or IRA, leave it with your former employer, or cash it out (usually not recommended due to taxes and penalties).

Your 4 Options

  1. Roll over to new employer 401(k): Direct rollover avoids taxes and penalties
  2. Roll over to an IRA: More investment choices, keep tax-deferred growth
  3. Leave it with old employer: If balance exceeds $5,000, you can usually keep it
  4. Cash out: Subject to income tax + 10% penalty if under 59.5

Outstanding Loan Deadlines

If you have an outstanding 401(k) loan, you typically must repay it within 60 days of leaving (or by the tax filing deadline for that year). Any unpaid balance is treated as a distribution and subject to taxes and potential penalties.