What to Do with a 401(k) After Switching Jobs

So, you’ve just changed jobs—congrats! Amid the excitement, there’s one thing you might be wondering about: what happens to that 401(k) you’ve been building at your old gig? Maybe you’ve even got a few IRAs from past jobs floating around. Let’s break down your options in a way that’s simple, like we’re chatting over a burger and fries. You’ve got four main paths for that 401(k):

leave it where it is
roll it over to an IRA
convert it to a Roth IRA or just
hold off and decide later.

Let’s dig into each one, weigh the pros and cons, and see why an IRA or Roth might be worth a look.

Option 1: Leave It Where It Is

You could just let your 401(k) hang out with your old employer’s plan. It’s the no-fuss, “I’ll deal with it later” choice. Your money stays invested in whatever funds the plan offers, chugging along with the market.

Pros:

It’s effortless—no forms, no decisions, just let it ride.
If the plan’s got low fees or decent investment picks, it might be a solid spot for your cash.

Cons:

You’re limited to the plan’s investment options—think of it like a small snack bar instead of a full buffet.
Fees might be higher than you’d like, quietly chipping away at your savings.
It’s another account to track, which can feel cluttered if you’ve already got IRAs in the mix.

This works if your old 401(k) is a keeper with good terms, but it might feel like leaving your money on autopilot with someone else steering.

Option 2: Roll It Over to an IRA

Here’s where you take your 401(k) and slide it into a traditional IRA. It’s like moving your savings from a locked vault to a toolbox you can customize however you want.

Pros:

Way more investment choices! You’re not stuck with the 401(k)’s short list—now you can pick stocks, bonds, ETFs, private equity, venture capita, or whatever suits your vibe. It’s like upgrading from a flip phone to a smartphone.
You get more control to tweak things as your goals evolve.
If you’ve got other IRAs, you can combine them into one spot—less chaos, more clarity.
No taxes or penalties hit you now; it’s a smooth, tax-deferred shift.

Cons:

You’ll need to choose a provider (like Schwab or Vanguard) and decide how to invest, which might feel like a lot at first.
Watch out for fees—pick the wrong setup, and they could nibble at your gains.

This is a great move if you’re ready to take charge and want your money to stretch further with more options.

Option 3: Do a Roth Conversion

Feeling bold? You could convert your 401(k) into a Roth IRA. This means paying taxes now, but your money grows tax-free from here on out—a total game-changer for the future.

Pros:

Tax-free withdrawals in retirement—huge perk if you think taxes will rise or you’ll be in a higher bracket later.
Like the IRA, you get a ton of investment options and more say over your cash.
No required minimum distributions (RMDs) down the line, unlike 401(k)s or traditional IRAs, so you can let it grow forever if you want.

Cons:

The catch: you’ll owe taxes on the full amount upfront. If your 401(k) is big, that bill could hurt.
It’s a gamble on future tax rates—if they drop or you’re in a lower bracket later, you might overpay now.
Same as the IRA: less creditor protection than a 401(k).

This is a slam dunk if you’ve got cash to cover the taxes and love the idea of tax-free growth. Less so if you’re strapped or unsure about tomorrow’s tax landscape.

Option 4: Wait and Decide Later

You don’t have to act right now. You could leave the 401(k) where it is and figure it out when you’ve got more headspace—like after you’ve settled into the new job.

Pros:

No rush, no stress—take your time.
Gives you a chance to research and pick the perfect move.

Cons:

You’re still stuck with the 401(k)’s limits until you decide.
Waiting might mean missing out on better growth opportunities elsewhere.

This is fine if you’re swamped and need a breather, but it’s more of a pause than a plan.

How They Stack Up

All these options keep your retirement savings alive, but they differ in a few key ways. Leaving it in the 401(k) or rolling to an IRA keeps things tax-deferred—no tax hit today. The Roth conversion flips that: pay taxes now, enjoy tax-free gains later. The IRA and Roth both open up a world of investment choices—way beyond the 401(k)’s narrow lineup—while “do nothing” keeps you tied to the old plan’s rules.

Why an IRA or Roth Could Be Your Best Bet

Rolling into an IRA or Roth could unlock some serious potential. The big win? Investment options. You’re not stuck with a handful of funds someone else picked—you can build a portfolio that fits you, whether that’s tech stocks, safe bonds, or a mix of everything. Plus, you’re in the driver’s seat, tweaking things as life changes.

If you’ve got other IRAs, consolidating into one account (IRA or Roth) simplifies your world—no more juggling multiple statements.

The IRA keeps it easy with no taxes now—just roll it over and let it grow. The Roth’s a long-term champ if you can handle the tax hit upfront, setting you up for tax-free withdrawals later. Either way, you’re breaking free from the 401(k)’s limits and giving your money room to shine.

Why Team Up with a Financial Advisor?

Now, here’s a little nudge: working with a financial advisor can make this whole decision a breeze. They’re like a guide who’s been down this road a million times—they can map out how each option fits your specific situation, from your tax bracket to your retirement dreams.

They’ll help you dodge pitfalls, like picking high-fee investments or misjudging that Roth tax bill, and they can even handle the paperwork so you don’t have to sweat it. Plus, they’ll look at your big picture—your 401(k), those old IRAs, your new job’s benefits—and craft a plan that’s all about you.

The Bottom Line

If you’re leaning toward action, the IRA’s a smooth, flexible choice—especially if you’ve already got IRAs and want to streamline. It’s low drama and high potential.

The Roth’s tempting if you’ve got cash to spare and want to lock in tax-free growth for decades—think of it as a gift to your future self. Leaving it in the 401(k) might work if it’s a stellar plan, but it often feels like settling. Waiting’s okay for now, but don’t sleep on it too long.

So, what’s your move? Grab a coffee, mull it over, and pick what feels right—your money’s ready to roll with you!

Have questions, schedule your no-obligation consultation here.

Sources*:

*These organizations are not affiliated with IFG. IFG does not endorse, support, or recommend any information that is not provided by its affiliates or representatives.

Disclaimer:

Information provided is for informational purposes only, and does not constitute an offer or solicitation to sell, a solicitation of an offer to buy, any security or any other product or service. Accordingly, this document does not constitute investment advice or counsel or solicitation for investment in any security. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.