How to Roll Over Your 401(k) When Changing Jobs (2026 Guide)

Left your job? Your 401(k) doesn't disappear — but you need to decide what to do with it. The wrong move can trigger taxes and penalties. The right move keeps your retirement savings growing tax-free.

Compare options with the 401(k) Calculator→

Your Four Options

Option	Tax Impact	Penalty	Best For
Roll over to IRA	None (if direct)	None	Most people
Roll over to new employer's 401(k)	None (if direct)	None	People who want simplicity
Leave it in old 401(k)	None	None	Good plan with low fees
Cash out	Full income tax	10% penalty if under 59½	Almost never recommended

Option 1: Roll Over to an IRA (Most Popular)

Move your old 401(k) balance into a Traditional IRA (or Roth IRA if converting). This is the most common choice because IRAs offer:

More investment options (stocks, bonds, ETFs, mutual funds — not limited to plan menu)
Lower fees (index funds at 0.03-0.10% vs typical 401k fees of 0.50-1.00%)
Full control over your account
Consolidation of multiple old 401(k)s into one account

How to Do a Direct Rollover

Open an IRA at a brokerage (Fidelity, Schwab, Vanguard — all free)
Contact your old 401(k) administrator and request a direct rollover to your new IRA
Provide the IRA account number and brokerage details
The money transfers directly — never touches your hands
No taxes, no penalties, no withholding

Critical: Insist on a direct rollover (trustee-to-trustee transfer). If the check is made payable to you instead of the IRA custodian, the old plan will withhold 20% for taxes, and you'll have 60 days to deposit the full amount (including the 20% from your own pocket) to avoid penalties.

Traditional 401(k) → Traditional IRA

No tax impact. The money stays pre-tax. Straightforward.

Traditional 401(k) → Roth IRA

This is a Roth conversion. You'll owe income tax on the entire converted amount. Could make sense if you're in a low-income year (between jobs, for example). See Roth Conversion Explained.

Option 2: Roll Over to New Employer's 401(k)

If your new employer allows incoming rollovers (most large plans do):

Pros:

Keeps everything in one place
May have access to institutional funds with lower fees
Preserves ability to take 401(k) loans
If you have a Roth 401(k), keeps it as Roth 401(k) (no conversion needed)

Cons:

Limited to new plan's investment menu
New plan may have higher fees
Some plans have a waiting period before accepting rollovers

How to Do It

Confirm your new plan accepts rollovers (ask HR)
Get the new plan's account details and rollover instructions
Contact old plan and request a direct rollover to the new plan
Process typically takes 2-4 weeks

Option 3: Leave It in the Old 401(k)

You can keep your money in your former employer's plan. This makes sense if:

The old plan has excellent low-cost funds (some large employers have institutional share classes)
Your balance is over $5,000 (plans can force-cash-out smaller balances)
You're between ages 55-59½ (the "Rule of 55" allows penalty-free withdrawals from the plan you left)

Downsides:

You can't make new contributions
Limited investment options
Harder to manage multiple old plans
May lose access to plan-specific benefits over time

Warning: If your balance is under $5,000, many plans can automatically roll it into an IRA or even cash it out. If under $1,000, they may mail you a check — triggering taxes and penalties.

Option 4: Cash Out (Usually a Mistake)

Taking the money as cash triggers:

Ordinary income tax on the full amount
10% early withdrawal penalty if you're under 59½
20% mandatory withholding (may not cover your actual tax bill)

The Real Cost of Cashing Out

401(k) Balance	Income Tax (22%)	Penalty (10%)	You Actually Receive	You Lose
$20,000	$4,400	$2,000	$13,600	$6,400
$50,000	$11,000	$5,000	$34,000	$16,000
$100,000	$22,000	$10,000	$68,000	$32,000

Plus you lose decades of compound growth. A $50,000 balance at age 30 would grow to roughly $380,000 by age 65 at 7% returns. Cashing out costs you $380,000 in retirement — not just $50,000.

The 60-Day Rule

If you receive a check made payable to you (indirect rollover), you have 60 calendar days to deposit the full amount into an IRA or new 401(k). The old plan withholds 20%, so you'll need to come up with that 20% from other funds to complete the rollover.

Example: Your 401(k) has $50,000. The old plan sends you $40,000 (after 20% withholding). To avoid taxes and penalties on the full $50,000, you must deposit $50,000 into an IRA within 60 days — meaning $40,000 from the check + $10,000 from your own savings. You'll get the $10,000 withholding back as a tax refund when you file.

Miss the 60-day deadline? The unrerolled amount is treated as a taxable distribution plus the 10% penalty.

Special Situations

Rule of 55

If you leave your employer at age 55 or older (50 for public safety employees), you can withdraw from that specific employer's 401(k) penalty-free. This rule only applies to the plan of the employer you left — not to IRAs or other 401(k)s. If you roll the money to an IRA, you lose this benefit.

After-Tax Contributions

If your old 401(k) includes after-tax (non-Roth) contributions, you can split the rollover:

After-tax contributions → Roth IRA (no tax, already taxed)
Pre-tax balance + earnings → Traditional IRA

This is the "mega backdoor Roth" on rollover.

Company Stock (NUA)

If your 401(k) holds employer stock, Net Unrealized Appreciation (NUA) rules may let you pay lower capital gains rates instead of ordinary income rates. Consult a tax advisor before rolling over company stock.

See how much your 401(k) rollover will grow→

Step-by-Step Rollover Checklist

☐ Decide where to roll over (IRA vs new 401(k))
☐ Open the receiving account if needed
☐ Get the account number and mailing/wire instructions
☐ Contact old plan administrator — request a direct rollover
☐ Specify: Traditional → Traditional or Traditional → Roth (if converting)
☐ Confirm the transfer (typically 2-4 weeks)
☐ Invest the funds once they arrive (cash sitting uninvested loses growth)
☐ Keep documentation for your tax records

FAQ

How long does a 401(k) rollover take?

Typically 2-4 weeks for a direct rollover. Some plans issue a check, which you'll need to deposit into the IRA. Electronic transfers are faster.

Is a 401(k) rollover taxable?

Not if it's a direct rollover from Traditional 401(k) to Traditional IRA (or Roth to Roth). A Traditional → Roth conversion is taxable.

Can I roll over only part of my 401(k)?

Yes, most plans allow partial rollovers. You could roll $30,000 to an IRA and leave $20,000 in the old plan, for example.

How many times can I roll over per year?

Direct rollovers (trustee-to-trustee) have no limit. The one-rollover-per-year rule only applies to indirect (60-day) IRA-to-IRA rollovers.

Should I roll over to Vanguard, Fidelity, or Schwab?

All three are excellent low-cost options with no account fees and broad investment selections. Pick whichever you prefer — the differences are minimal.