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

When you leave a job, you generally have several choices for your vested 401(k) balance: leave it in the former plan if allowed, move it to a new employer plan that accepts it, roll it into an IRA, or take a distribution. Each choice has different costs, features, and tax consequences.

Compare your options before moving money

Option	What to review
Leave it in the former plan	Eligibility, fees, investment choices, and withdrawal rules
Move to a new employer plan	Whether rollovers are accepted, costs, features, and consolidation benefits
Roll into an IRA	Investment choices, account and advice fees, withdrawal rules, and protections
Take cash	Current taxes, possible additional early-distribution tax, and lost retirement savings

A rollover is not automatically an improvement. Compare what you would gain with what you might give up. Your own contributions are vested; employer contributions may follow a vesting schedule.

What makes a direct rollover different?

With a direct rollover, eligible funds go to the receiving retirement plan or IRA rather than being paid to you personally. This generally avoids the mandatory withholding that applies to taxable eligible employer-plan distributions paid directly to you.

If you receive the money personally, the rollover usually must be completed within 60 days, and withholding can complicate moving the full amount. Exceptions and eligibility rules apply. A move from pre-tax funds to a Roth IRA generally creates taxable income.

Questions to answer before signing paperwork

• What are the total costs in the current and proposed accounts?
• Will I need access to any of this money soon?
• Would moving it change early-withdrawal exceptions or creditor protections?
• Is there an outstanding plan loan or employer stock requiring special review?
• What compensation would the person recommending the move receive?

Frequently asked questions

Do I have to roll over my 401(k) immediately after leaving?

Not necessarily. Ask the administrator whether you can remain in the plan and whether balance-related distribution rules apply.

Does a rollover mean buying an annuity?

No. Moving the account and selecting a financial product are separate decisions. An annuity requires its own review of costs, liquidity, contract terms, and suitability.

Where should I start?

Gather your current statement and plan fee information. Ask your administrator about your options before authorizing a distribution.

Considering how insurance or an annuity might fit your retirement goals? Visit LHG Financial for an educational conversation, and coordinate investment and tax decisions with appropriately qualified professionals.

Sources: Investor.gov: switching jobs; IRS: termination of employment; IRS: rollover rules; FINRA: retirement accounts.

Educational information, not individualized investment, tax, or legal advice. Confirm current rules and your plan's requirements before acting.