Left a Job With a 401(k)? Here Are Your Options

Changing jobs raises an immediate question about the retirement account you're leaving behind. There's rarely a single right answer, but there are four real options worth understanding before you decide.

• Leave it where it is: If your former employer's plan allows it and the account balance meets any minimum, you can simply leave the money in place. This can make sense if the plan offers strong, low-cost investment options, like an especially good stable value or index fund, that you'd lose access to elsewhere. The tradeoff is having your savings spread across multiple accounts, which makes it easier to lose track of overall allocation and rebalancing.

• Roll it into your new employer's plan: Consolidates your savings into one account and keeps it protected under ERISA creditor protections. Worth checking the new plan's investment menu and fees before assuming this is automatically the best move.

• Roll it into an IRA: Typically opens up a much wider range of investment choices and can simplify managing your overall portfolio. Two things worth checking first: whether you have any interest in a future backdoor Roth contribution strategy, since a large pretax IRA balance complicates that due to the pro-rata rule, and whether your state's creditor protection for IRAs differs meaningfully from ERISA-qualified plan protection.

• Cash it out: Generally the option to avoid before age 59½. A cash-out triggers ordinary income tax on the full pretax balance plus, in most cases, a 10% early withdrawal penalty, and it permanently removes that money from tax-advantaged growth.

One mechanical detail that trips people up: if you move money between accounts yourself rather than using a direct, trustee-to-trustee rollover, the plan is required to withhold 20% for taxes, and you then have 60 days to deposit the full original amount (including the withheld 20%, from other funds) into the new account to avoid tax consequences on the shortfall. A direct rollover avoids this entirely, and is almost always the cleaner way to move the money.

If you're weighing these options for an account you recently became eligible to move, it's worth a conversation before you act, especially if a Roth conversion, backdoor Roth strategy, or specific investment options are part of your broader plan.