Should You Roll Over Your 401(k) to a New Employer? Here’s How to Decide

meshaphoto / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

When you change jobs, what happens to your old 401(k) can have a lasting impact on your retirement savings. You can leave it with your former employer, but doing so can mean higher fees, limited investment choices, and one more account to keep track of. Rolling your balance into your new employer’s plan or an IRA can streamline your finances, reduce costs, and keep your savings working harder in one place.

Here’s how to decide whether a 401(k) rollover is the best move and what steps to take to make the transition smooth.

What Happens to Your Old 401(k) When You Change Jobs

When you leave a job, your 401(k) stays put — it doesn’t disappear, but it also doesn’t move automatically. What you do next depends on your long-term goals, investment preferences, and the fees tied to each option.

Generally, you have four main choices:

• Leave the account with your former employer. This can be convenient short term, but you’ll have less control over investment options and possibly higher fees.
• Roll it into your new employer’s plan. This keeps all your retirement savings in one place and makes it easier to manage.
• Roll it into an IRA. This option offers flexibility, wider investment choices, and the potential for lower fees.
• Cash it out. This should be a last resort — withdrawals before age 59½ typically trigger taxes and a 10% early withdrawal penalty.

Reasons to Roll Over Your 401(k) to Your New Employer

If your new employer’s 401(k) offers solid investment options, reasonable fees — ideally around 1% or less — and overall plan quality you’re comfortable with, rolling over your old 401(k) could be a smart move. It keeps your retirement savings consolidated and may give you access to benefits you wouldn’t get elsewhere.

Here are a few key advantages:

• Simplified management. Combining your accounts makes it easier to track your progress, monitor performance, and adjust your investments as needed.
• Lower fees. Employer-sponsored plans often have lower administrative and fund costs than retail IRAs.
• Access to exclusive investment options. Large employer plans may include institutional funds with lower expense ratios that aren’t available to individual investors.
• Loan flexibility. Some employer 401(k) plans allow participants to borrow against their balance — a feature that IRAs typically don’t offer.

When It Makes Sense to Keep Your Old 401(k)

Sometimes, leaving your 401(k) with your former employer can be the right decision — especially if the plan offers advantages that a new employer’s plan or IRA can’t match.

• The plan offers better investment options or lower fees. Some workplace plans have access to high-performing funds or institutional pricing that keeps costs down.
• You’re nearing retirement and want to avoid the hassle of a rollover. If you plan to retire soon, keeping your account where it is can help you avoid unnecessary paperwork or delays.
• You’re happy with the plan’s performance or service. A strong track record and responsive customer support may make staying put the more comfortable choice.

How to Roll Over Your 401(k) to a New Employer

Rolling over your 401(k) to a new employer is straightforward, but it does require a few careful steps to ensure your money stays protected and tax-deferred.

Here’s how to do it:

1. Confirm eligibility. Check with your new employer’s HR or plan administrator to make sure the plan accepts rollovers from previous employers.
2. Request a direct rollover. Contact your former plan administrator and ask for a direct transfer — this moves your funds straight from your old plan to your new one, skipping your personal bank account.
3. Complete any required paperwork. Both your old and new plan providers may need signed forms to authorize the transfer.
4. Verify completion. Once the funds arrive, review your new account to ensure the balance and investments were transferred correctly.

A Quick Tip About Indirect Rollovers

An indirect rollover, where you receive the funds yourself before redepositing them, can lead to taxes and penalties if not handled properly. You’ll have just 60 days to deposit the full amount into your new account — miss that window, and the IRS will treat it as a taxable withdrawal.

What to Consider Before Rolling Over Your 401(k)

Before moving your 401(k), take time to compare the details of your old and new plans. The right choice depends on how each one stacks up in terms of cost, flexibility, and convenience.

• Fees. Review both administrative charges and fund expense ratios. Even a small percentage difference can make a big impact on long-term returns.
• Investment options. Look at the range and quality of available funds. A broader mix of low-cost index funds or target-date options may offer better growth potential.
• Account convenience. Consider how easy it is to manage your account online, through mobile apps, or with help from customer service.
• Employer match and vesting. Understand your new employer’s matching policy, eligibility requirements, and vesting schedule to make sure you don’t miss out on free money.

Making the Right Move for Your Retirement

Rolling over your 401(k) to a new employer can simplify your finances and keep your retirement savings on track — but it isn’t always the best fit for everyone. Take time to compare fees, investment options, and account features across plans before deciding. The right choice is the one that aligns with your long-term goals and gives your money the best chance to grow.

Share This Article: