Crypto 101 with Jonathan · Lesson 7 of 8
What happens to a 401(k) when you leave a job?
Your old plan did not leave with you. The options, in plain terms, and the questions to ask before choosing.
In this lesson
- Money in a former employer’s 401(k) is still yours. It just keeps sitting in that plan unless you move it.
- The usual options: leave it, move it to a new employer’s plan, roll it into an IRA, or cash it out (which usually means taxes and possibly penalties).
- Which is right depends on fees, investment choices, your age and your plans. A tax professional can tell you what applies to you.
Lesson notes
When you leave a job, the money in that employer’s 401(k) stays yours. It does not disappear, and it does not follow you automatically. It sits in the old plan until you decide what to do with it, and many people leave it there for years without a decision.
There are usually four options. One: leave it where it is. Two: move it into your new employer’s plan, if that plan allows it. Three: roll it over into an IRA, which can be a direct transfer from one institution to another. Four: cash it out, which generally means income tax on the amount and, before age 59½, often a penalty on top.
The right choice depends on things only you know: the fees in each plan, the investment choices you want, your age, and what the money is for. The rollover route is the one that lets people choose a wider range of investments, including, with the right kind of account, digital assets. Whether that is wise for you is a question for you and a tax professional, not for a one-minute video.
If you want help working out what kind of account you have and what it may be eligible for, that is exactly what a first call is for. No commitment, and no pressure.