Free guide · Updated September 2026
Found your old 401(k)? Here is what you can do with it
You have five choices. Four of them keep the money growing for retirement, and one usually costs a quarter of it or more. Which account it ends up in matters, and how it is invested once it gets there matters even more.
Still looking? Search for the employer first. Would you rather have someone walk you through this? Ask for a licensed advisor’s help, free.
Your five options
1. Leave it in the old plan
Usually allowed if the balance is over $7,000.
You do not have to do anything. The account stays invested as it is, and it is still yours. Plans are allowed to push small balances out: under $1,000 they can mail you a check, and between $1,000 and $7,000 they can move it to an IRA they pick for you if you do not answer their notice.
What is good about it
- • No paperwork and no tax
- • Large plans often have low-cost funds you cannot buy on your own
- • Strong federal protection from creditors
What to watch
- • You cannot add money to it
- • Easy to lose track of, especially after a move or a company merger
- • You are limited to that plan’s fund menu and its rules for taking money out
2. Roll it into your current employer’s plan
If your new plan accepts rollovers. Most do; ask HR.
The old plan sends the money straight to your new plan. Done as a direct rollover, nothing is taxed and nothing is withheld.
What is good about it
- • One account to watch instead of two
- • Keeps the money under the same federal creditor protection
- • May let you borrow against it, which an IRA never allows
- • If you are still working past the age when required withdrawals start, money in your current employer’s plan can usually wait
What to watch
- • You are limited to the new plan’s fund menu and fees, which can be better or worse than the old one
- • The new plan may make you wait until you are eligible
3. Roll it into an IRA
An account you open yourself at a bank, brokerage or with an advisor.
Pre-tax 401(k) money goes to a traditional IRA and Roth 401(k) money goes to a Roth IRA. Done as a direct rollover, nothing is taxed. This is the option with the widest choice of investments, and it is also the one where you have to make that choice yourself.
What is good about it
- • Widest choice of investments
- • You can combine several old 401(k)s in one place
- • Not tied to any employer
What to watch
- • The money arrives as CASH and stays in cash until you invest it (see below)
- • Costs vary a lot: compare fund fees and any advisory fee with what the old plan charged
- • No loans, and creditor protection outside bankruptcy depends on your state
- • If you leave a job at 55 or later you can usually take money from that employer’s 401(k) without the 10% penalty. That exception does not follow the money into an IRA
4. Convert it to a Roth IRA
Pay the tax now so that qualified withdrawals later are tax-free.
Moving pre-tax 401(k) money into a Roth IRA is allowed, but the amount you convert is added to your taxable income for that year. There is no 10% penalty on a conversion. Whether it is worth it depends on your tax rate now compared with later, and on having money outside the account to pay the tax.
What is good about it
- • Qualified withdrawals in retirement are tax-free
- • No required withdrawals during your lifetime
What to watch
- • A large conversion can push you into a higher bracket for the year
- • Paying the tax out of the retirement money itself shrinks what is left to grow
5. Cash it out
The most expensive option for most people.
The plan must withhold 20% for federal tax before it sends you the check. The whole amount counts as income for the year, and if you are under 59½ there is usually a 10% additional tax on top. As an illustration: someone under 59½ in the 22% federal bracket who cashes out $50,000 owes about $11,000 in income tax plus a $5,000 penalty, before any state tax.
What is good about it
- • You get the money now, which can matter in a real emergency
What to watch
- • Tax and penalty often take a quarter to a third of the balance
- • The money stops growing for retirement, and you cannot put it back later
- • There are exceptions to the 10% penalty (for example leaving the job at 55 or later, disability, and some medical costs). Check before assuming it applies
Four mistakes that cost people money
Taking a check made out to you
Ask for a direct rollover, where the check or transfer is made out to the new plan or IRA "for the benefit of" you. If the check is made out to you personally, 20% is withheld, a 60-day clock starts, and to roll over the full amount you must replace the withheld 20% from your own pocket. Miss the 60 days and it is treated as a cash-out.
Leaving the rollover sitting in cash
An easy one to miss. A rollover lands in the IRA’s cash or "settlement" fund. Until you pick investments it earns cash rates. People discover years later that their retirement money was never invested.
Forgetting an outstanding plan loan
If you still owe money on a 401(k) loan when the account is paid out, the unpaid amount is normally treated as a distribution. You generally have until your tax-filing deadline for that year to roll over an equal amount and avoid the tax.
Rolling over company stock without asking first
If the 401(k) holds your old employer’s own stock, special tax rules (net unrealized appreciation) can make it cheaper to move the shares to a regular brokerage account instead. The choice is permanent once the rollover is done, so ask a tax professional beforehand.
Why the investments matter more than the account
Moving the money is a one-day job. How it is invested afterwards decides what it is worth when you retire. Take $50,000 left alone for 25 years:
- $64,000
- Left in cash at 1% a year
- $215,000
- Invested, 6% a year
- $169,000
- Same investments, but 1% a year more in fees (5% net)
Hypothetical arithmetic, compounded annually with no further contributions, rounded. It is not a prediction or a promise of any return. It ignores inflation and taxes. Investments can lose value, and higher expected returns come with larger swings along the way.
Check that it is actually invested. After any rollover, log in and look at the holdings. If it says cash, money market or settlement fund, nothing has been chosen yet.
Match the mix to your timeline. Money you will not touch for decades can usually ride out more ups and downs than money you need in five years. The split between stocks and bonds drives most of both the growth and the swings.
Spread it out. A broad fund holding hundreds or thousands of companies does not depend on any one of them. Target-date funds are a common single-fund choice that shifts the mix for you as the year approaches.
Know what you pay. Every fund has an expense ratio, and an advisor or platform may charge on top. As the third box shows, one percentage point a year is a large number over 25 years. Paying for advice can be worth it; you should simply know the figure.
Get help rolling over or investing your 401(k)
A licensed financial advisor can look at your situation, explain which of these fits, handle the paperwork with you and help you choose investments. Asking is free and there is no obligation.
Common questions
What is the best thing to do with an old 401(k)?
There is no single best answer. Leaving it, rolling it into your current employer’s plan and rolling it into an IRA all keep the money tax-deferred; they differ in fees, investment choice, creditor protection and convenience. Cashing out is the most expensive choice for most people because of income tax and, under age 59½, a 10% additional tax.
Do I pay tax when I roll over a 401(k)?
Not if it is a direct rollover of pre-tax money to another employer plan or a traditional IRA, or of Roth 401(k) money to a Roth IRA. You do pay income tax if you convert pre-tax money to a Roth IRA, or if you take the money as cash.
How long do I have to roll over a 401(k)?
There is no deadline while the money is still in the old plan, although plans can force out balances of $7,000 or less. A deadline only starts if a check is paid to you personally: you then have 60 days to deposit it in another plan or IRA.
What happens to a rollover IRA if I never choose investments?
It stays in the account’s cash or settlement fund, earning cash rates. IRAs that a plan opens for you automatically after a force-out are also invested to preserve principal, not to grow, and their fees can outpace the interest. In both cases the money is safe but is not growing for retirement until someone invests it.
Is it free to talk to an advisor through 401kHunter?
Yes. Asking for help is free and carries no obligation. If you later hire an advisor, they will tell you what they charge before you agree to anything. 401kHunter is not a financial advisor and does not give advice itself.
This page is general information about U.S. federal rules as of September 2026, not investment, tax or legal advice. Rules have exceptions, states tax retirement money differently, and your plan’s own terms apply. 401kHunter is not a financial advisor. Confirm anything that affects a decision with the plan, the IRS or a licensed professional.