Can I keep my 401k after I get fired?

Yes. The money in your 401(k) belongs to you, even if you do get fired. You will, however, need to decide what to do with that money. You can choose to roll it over to another retirement plan, such as an IRA, move it to your next employer or leave it there. Depending on the company, you might be required to move the money out if the balance is under the company’s minimum requirement.

What happens to my employer contributions if I get fired?

Employer contributions end once you are no longer employed with the company. If you are fully vested, 100% of the money from the employer’s contributions belongs to you. However, if you are only partially invested or not vested, you might not receive the employer contribution match.

How soon can I access my 401(k) after being fired?

You can always access your 401(k) account, regardless of whether or not you were fired, left or are a current employee. Remember, though, that any withdrawals you take before age 59 ½ could be taxed with an early withdrawal penalty, as well as be considered income. You can withdraw the money under certain circumstances, such as due to hardship or other similar circumstances. There’s also the rule of 55, which lets you withdraw retirement money without penalty if you are at least 55 years old.

Should I cash out my 401(k) or roll it over after getting fired?

The best thing to do is to roll over your 401(k). Cashing out the money means you will need to pay taxes that include early withdrawal penalties, which would end up costing you more in the long run than if you had just rolled over the money.

What if I’m not vested in my 401(k) when I get fired?

If your 401(k) contributions aren’t vested, then you might not be able to collect any money that was considered an employer contribution. The money that you contributed, however, remains in the account, as well as any profits from the funds you’ve earned.

What If Your New Employer Doesn’t Offer a 401(k)?

If your employer doesn't offer a 401(k) or there's a waiting period before you can access it, you can leave your 401(k) in your former employers account or roll your money into a 401(l)

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What Happens to Your 401(k) if You Get Fired?

June 23, 2025

4 min Read

Written by Hiba Boutary

Edited by Emily Gadd

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Your 401(k) funds belong to you, so if you lose your job, you get to keep the funds. In addition to your contributions, you also have a right to your employer’s contributions or matching ones, as long as those funds are vested. Vested funds are the ones you have complete ownership of.

Here’s what you can do with your 401(k) if you lose your job.

1. Roll Over Into an IRA

Pros

Might have more available options to you
You can avoid early withdrawal penalties and retain any tax advantages
Fees could potentially be lower

Cons

You’ll need to set up a new account if you haven’t already set up an IRA before
There may be trading costs or management fees
Might not offer loan options

2. Withdraw the Funds

Pros

You can access your cash to use right away
It might be necessary if you have an emergency

Cons

You will pay an early withdrawal penalty, and this could be considered taxable income
Borrowing from your retirement funds takes away from your future self’s finances

3. Leave the Money in the Account

Pros

No action is needed right away
There may be benefits to keeping the account as-is, such as low fees

Cons

You may not be able to receive employer benefits or add more contributions
You may be asked to move the funds if you are under the employer’s minimum required to keep balances in the account
You may have to pay account maintenance fees that your employer was covering before

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4. Roll Over Into a 401(k) With Your New Employer

Pros

Consolidates your retirement savings
Ensures you won’t pay early withdrawal tax penalties
Could have more benefits, such as lower fees, than other retirement plans

Cons

Not every employer will allow a rollover
Your choices may be limited depending on what the new employer offers.
Paperwork is involved, as well as the time it takes to transfer

What Happens to Your 401(k) If You’re Fired Before You’re Vested

You may lose out on some contributions if you were fired before becoming vested in your 401(k). If you are vested, the employer must distribute your vested account balance promptly and within a specified timeframe. This varies depending on the circumstances of your termination.

Can Your Employer Hold Your 401(k) After Termination?

Your employer cannot legally block your access to your 401(k) account after they fire you or lay you off, with very few exceptions — such as if you owe the company money. Since your 401(k) account is your property, your employer must follow IRS rules and procedures on distributions when you leave the company.

You have options if you believe your employer isn’t following proper procedures or unlawfully withholding your account balance. You can speak to an attorney or contact the U.S. Department of Labor, Employee Benefits Security Administration, for information on how you can move forward.

Taxes and Your 401(k) After Getting Fired

You won’t have to pay any taxes if you roll your 401(k) into an IRA or into a new employer’s retirement account.

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However, if you’re under 59 1/2 and you withdraw your funds, you will have to pay income tax plus a 10% early withdrawal penalty.

How Do You Initiate a Rollover With a New Employer?

To initiate a rollover, you must contact the administrator of your old 401(k) plan and request a direct rollover of your balance to the new one. The new plan administrator will then walk you through the process and let you know if there is additional paperwork you need to complete.

There are rules and limitations associated with 401(k) rollovers, including tax implications and restrictions on the investments you can hold in your plan.

If you’re unsure of the process, it’s a good idea to speak to a financial advisor or tax professional. Doing so before you initiate a rollover ensures that it aligns with your long-term retirement planning goals and strategies.

Melanie Grafil and Amber Barkley contributed to the reporting for this article.

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