What happens to your 401(k) when you change jobs?

If you've saved some money in your workplace retirement plan—like a 401(k), 403(b), or 457(b) account—you may be wondering what to do with it if you move from one job to another.

Moving that money into an Individual Retirement Account (IRA) can be an easy way to manage your retirement savings from your past—and future—jobs in one place.1

When you leave a job, you generally have four things you can do with your retirement savings:

  1. Leave the money in your old employer's plan
  2. Roll it over1 to your new employer's plan (if that's allowed)
  3. Roll it over to a new IRA
  4. Cash out of the plan and get your money immediately (which may incur taxes and IRA penalties, depending on your age)

Of course, there are advantages and disadvantages for each option:

1. Leaving money in your current plan

Just because you're leaving your job doesn't mean you have to also walk away from your employer's retirement plan. There may be some advantages to leaving money in your old employer's plan. For example, you could pay less in mutual fund fees through an employer's plan than if you invested in those funds with an IRA.

However, by leaving the money in the prior employer's plan, you risk having your retirement money scattered with more than one old employer over time as you switch jobs. Also, you won't be able to put aside more money into these accounts, and where you can invest that money is limited to the investment choices offered by your old employer.

You may also face additional fees. Some accounts may begin charging you a management fee if you're no longer contributing to them or no longer employed at your old company. When you consolidate, you may have access to a lower fee structure due to having more assets in one place.

2. Rolling over into a new employer plan

If you change jobs, you may decide to move your retirement savings from your old workplace plan into your new employer's plan, if your new employer allows it. Just like a rollover IRA, this option provides you with one account for all your retirement assets and you may have the ability to invest in plan-specific investment options.

3. Consolidating multiple accounts with a rollover IRA

A rollover IRA is when you take a retirement account you already have—like a 401(k)—and roll it over into a new IRA. A rollover IRA offers a great way to consolidate multiple accounts into one IRA. Note that many types of retirement accounts, not just workplace plans, can be rolled over into an IRA.

IRAs may provide a greater variety of investment options than your workplace plan since many employer plans limit the funds in which you can invest. A rollover IRA can also provide you a view of all your retirement assets in one place.

When you consolidate1 your retirement accounts into one, it's easier to avoid overlaps and gaps in your investment mix. You may also have access to personalized money management and investment guidance.

4. Withdrawing your money in cash

While getting immediate access to your money is tempting, you may face tax penalties for cashing out before age 59½. Those penalties could eat up as much as 10% of your savings.

You should consider differences in investment options, services, fees and expenses, withdrawal options, required minimum distributions, other plan features, and tax treatment. As always, you can speak with a TIAA Consultant, your tax advisor, or use Retirement Advisor to help plan for the retirement you want.

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1 Before rolling over assets, consider your other options. You may be able to leave money in your current plan, withdraw cash or roll over the assets to your new employer's plan if one is available and rollovers are permitted. Compare the differences in investment options, services, fees and expenses, withdrawal options, required minimum distributions, other plan features, and tax treatment. Speak with a TIAA consultant and your tax advisor regarding your situation at TIAA.org/reviewyouroptions.​

This material is for informational or educational purposes only and does not constitute investment advice under ERISA. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made  based on the investor’s own objectives and circumstances.