What to Do With a 401(k) When Leaving a Job

Featured on The Wall Street Journal

By Daisy Maxey

Across the board, 401(k)s have taken big hits in recent months. While many investors have heeded the general advice to stand pat and give markets time to recover, there are times when investors are forced to make decisions regarding their accounts.

One of those moments is when you leave your employer—something many people are being forced to do these days. What you do with your 401(k) as you depart can have a big impact on your financial future.

Generally, a 401(k) plan participant leaving a job may choose to leave the money where it is; roll it over into a new employer’s 401(k) plan; roll it into an individual retirement account; or cash it out, which can be a costly move.

None of these decisions should be taken lightly.

“At the highest level, the decision to roll over from a 401(k) to an individual retirement account is often six of one, half a dozen of another; but the time when it’s different, you have to understand where those differences are,” says Joel Dickson, global head of enterprise advice methodology at Vanguard Group, one of the largest 401(k) record-keepers in the country.

What follows is a look at some of the most important factors in weighing whether to do a rollover, and to which type of account.