What to do with your 401(k) when you change careers

First, find out what you actually have

Before choosing, gather the facts:

• Balance and how it is invested.
• Vesting. Your own contributions are yours, but employer contributions may vest over time. Leaving before you are fully vested can mean forfeiting part of the employer money. Check the vesting schedule; sometimes a short delay in your leaving date makes a real difference.
• Outstanding loans. A plan loan may become due when you leave, and an unpaid loan may be treated as a distribution.
• Roth and pre-tax portions, which can have different handling.

The IRS says the plan administrator must give you a written explanation of your rollover options. Ask for it.

Option 1: leave the money in the old plan

Many plans let former employees keep their account. This can be fine if the plan has low costs and good investment choices. Keep your contact details up to date with the plan. The IRS notes that if you leave and do not make a choice, plans may move small balances into an IRA in your name or pay out very small balances to you, so do not assume the account will simply stay put. Check your plan's rules.

Option 2: roll it into your new employer's plan

If your new employer has a plan that accepts rollovers, you can move the money there and keep your savings in one place. The IRS notes that a retirement plan is not required to accept rollover contributions, so ask the new plan administrator first. If you are moving into contract or self-employed work, this option may not exist.

Option 3: roll it into an IRA

You can roll eligible distributions into an individual retirement account at a financial institution you choose. This often offers a wide range of investments. Compare fees and services, and understand whether you are rolling pre-tax money into a traditional IRA or Roth money into a Roth IRA, since mixing them up has tax consequences.

Option 4: cash it out

You can usually take the money as cash, but the IRS explains the costs clearly. If you do not roll over a payment, it will generally be taxable (other than qualified Roth distributions and amounts already taxed), and you may owe a 10% additional tax on early distributions (2026 tax year) unless an exception applies. In addition, a retirement plan distribution paid to you is subject to mandatory 20% withholding, even if you intend to roll it over later.

For a career changer, the bigger cost may be the lost future growth of savings that would have compounded for years. If you need money to retrain, compare other options first; our retraining options note and the guide to free training through American Job Centers are good places to start.

How a rollover works: direct versus 60-day

The IRS describes the methods:

• Direct rollover. You ask your plan administrator to pay the money directly to another retirement plan or to an IRA. The administrator may send a check payable to your new account. No taxes are withheld from the transfer.
• 60-day rollover. If the distribution is paid to you, you can deposit all or part of it into an IRA or plan within 60 days (2026 tax year rule). Because 20% is withheld (2026 tax year) from a plan distribution paid to you, you would need to use other funds to make up the withheld amount if you want to roll over the full balance.

The IRS gives an example (illustrating rules that apply in the 2026 tax year): from a $10,000 distribution, an employer withholds $2,000. If only the $8,000 is rolled over, the $2,000 is taxable and may face the 10% additional tax. To roll over the full $10,000, the person must add $2,000 from other sources.

The lesson: if you are moving the money, choose a direct rollover. It avoids withholding and the risk of missing the 60-day deadline. The IRS may waive the deadline in certain circumstances beyond your control, but you should not rely on that.

Rules for IRA-to-IRA rollovers

If you later move money between IRAs, know that the IRS generally allows only one IRA-to-IRA rollover in any 12-month period across all your IRAs. Direct trustee-to-trustee transfers and plan-to-IRA rollovers are not limited by this rule. When in doubt, ask for a direct transfer.

Questions to ask before deciding

1. What fees does my current plan charge, and what would the alternatives charge?
2. What investments are available in each option?
3. Will I need to access this money before retirement? If yes, what would it cost?
4. Does my new plan accept rollovers, and how long does the process take?
5. Do I have Roth money, after-tax money or company stock in the plan that needs special handling?

Keep retirement in the transition budget

A career change can reduce or pause retirement contributions for a while. That is a real cost to include in your planning. When you use the cash runway calculator or the retraining payback tool, consider adding a line for restarting retirement savings once you are settled. Our financial runway note covers the wider budget.

When to get help

Consider a fee-only financial planner or tax professional if you have a large balance, company stock, an outstanding loan, Roth and pre-tax money mixed together, or a plan to withdraw money early. Ask anyone advising you how they are paid, and be cautious with recommendations to move your savings into products with high fees or long surrender periods.