Retirement · June 18, 2026 · 2 min read
You have an old 401(k) somewhere. Here are your four options.
Leave it, roll it to the new plan, roll it to an IRA, or cash it out. Three are reasonable. One is almost always a mistake.
The average American changes jobs about a dozen times. Most leave a retirement account behind at least once, and a surprising number never look at it again.
If that's you, here are the only four things you can actually do — and the honest case for and against each.
Option 1 — Leave it where it is
Works when the old plan has genuinely good, low-cost institutional funds, or you left the employer in the year you turned 55 or later (which can allow penalty-free access that an IRA wouldn't).
Against it: you're managing an account you never log into, at a provider you no longer have a relationship with, with beneficiary designations you set a decade ago.
Option 2 — Roll it into your new employer's plan
Works when the new plan is strong and you value having everything in one place. It also keeps the door open for a backdoor Roth strategy later, because money sitting in a traditional IRA can complicate that.
Against it: you're limited to the new plan's menu.
Option 3 — Roll it to an IRA
Works when you want the full investment universe, consolidated statements, and coordinated planning across everything you own.
Against it: you may lose that age-55 provision, and IRA creditor protection varies by state — Illinois and Nevada do not treat this identically.
Option 4 — Cash it out
This is the one that's almost always a mistake. You'll generally owe ordinary income tax plus a 10% penalty if you're under 59½, your employer is required to withhold 20% up front, and you permanently delete the compounding that balance was going to do for the next twenty years.
Cashing out a $40,000 balance at 40 doesn't cost you $40,000. It costs you what $40,000 would have become by 65.
How to actually decide
The right answer depends on four things: your age, the quality of both plan menus, whether a backdoor Roth is part of your future, and what state you live in.
That's genuinely a fifteen-minute conversation, and we do not charge for it. Bring your most recent statement from the old plan — that's all we need to tell you which of the four fits.
Rollover decisions have tax consequences and available options depend on your circumstances. This is educational and not individualized tax advice.
This article is educational and is not individualized financial, tax, or legal advice. Please speak with a licensed professional about your own situation.
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