When you leave a job, you may be wondering what happens to your 401(k). You have a few options. You may be able to leave your account where it is if your balance isn't too small. You may roll it over to your new employer’s plan or to an individual retirement account (IRA). Or you could cash it out—but that could mean serious tax consequences.

Here are the options you can choose from.

Keep Your 401(k) Where It Is

If you have more than $7,000 invested in your 401(k), most plans allow you to leave it where it is after you separate from your employer. If you have a substantial amount saved and like your plan portfolio, then leaving your 401(k) in the account may be a good idea. If you ജare likely to forget about the account or are not particularly impressed with the plan’s investment options or fees, consider some of the other options.

Roll Over Your 401(k) to a New Plan

If you’ve switched jobs, see if your new employer offers a 401(k), when you are eligible to participate, and if it allows rollovers. Many employers require new employees to put in a certain number of days of service before they can enroll in the company's retirement savings plan. Make sure that your new 401(k) account is active and ready to receive contributions before you roll over your old account.

Once you are enrolled in a plan with your new employer, it’s simple to 澳洲幸运5官方开奖结果体彩网:roll over your old 401(k). You can elect to have the administrator of the old plan deposit the balance of your account directly into the new plan by simply filling out some paperwork. This is called a 澳洲幸运5官方开奖结果体彩网:direct transfer, made from custodian to custodian, and it saves you 澳洲幸运5官方开奖结果体彩网:any risk of owing taxes or missing a deadline.

Alternatively, you can elect to have the balance of your old account distributed to you in the form of a check, which is called an 澳洲幸运5官方开奖结果体彩网:indirect rollover. You must deposit the funds into your new 401(k) within 60 days to avoid paying income tax on the entire balance and an additional 10% penalty for 澳洲幸运5官方开奖结果体彩网:early withdrawal if you’re younger than age 59½. A major drawback of an indirect rollover is that your old employer is required to withhold 20% of it for federal income tax purposes—and possibly state taxes as well.

Roll Over Your 401(k) Into an IRA

If you’re not moving to a new employer, or if your new employer doesn’t offer a retirement plan, you still have a good option—you can roll your old 401(k) into an IRA. You’ll be opening the account on your own, through the financial institution of your choice. 澳洲幸运5官方开奖结果体彩网:The best IRAs offer a good customer experience and more.

Take Distributions from Your 401(k)

You can begin taking qualified distributions from any 401(k), old or new, after age 59½. That is, you can start taking some money out without paying the 10% tax penalty for early withdrawal.

If you’re retiring, it might be the right time to start drawing on your savings for income. With a traditional 401(k), you must pay income tax at your ordinary rate on any distributions that you take.

If you have a 澳洲幸运5官方开奖结果体彩网:designated Roth account, any distributions that you take after age 59½ are tax-free as long as you have held the account for at least five years. If you do not meet the five-year requirement, only the earnings portion of your distributions is subject to taxation.

If you retire before age 55 or switch jobs before age 59½, you may still take distributions from your 401(k). However, you will be required to pay a 10% penalty, in addition to income tax, on the taxable portion of your distribution—which may be all of it. The 10% penalty does not apply to those who retire after age 55 but before age 59½.

Once you reach the age of 73 (for those born between 1951 and 1959; the age of 75 for those born in 1960 or later), you are required to begin 澳洲幸运5官方开奖结果体彩网:taking RMDs from your 401(k) when you leave your job. Your RMD amount is di𓆉ctated by your expected lifespan and your account balance.

Cash Out Your 401(k)

Of course, you can just take the money and run. Nothing is stopping you from liquidating an old 401(k) and taking a 澳洲幸运5官方开奖结果体彩网:lump-sum distribution,💫 but most financial advisors caution strongly against it. It reduces your retirement savings unnecessarily, and on top of that, you will be taxed on the entire amount.

If you have a large sum in an old account, then the tax burden of a full withdrawal may not be worth the windfall. Plus, you may be subject to the 10% early withdrawal penalty.

The Bottom Line

If you leave your job, your 401(k) will stay where it is until you decide what you want to do with it. You have several choices including leaving it where it is, rolling it over to another retirement account, or cashing it out. Be sure to look at all the pros and cons of each before deciding 澳洲幸运5官方开奖结果体彩网:what to do with your old 401(k).