Managing your 401(k) balance after changing jobs

The great thing about 401(k) plans is that your assets are portable—you can leave them where they are, take them with you to your new employer or roll them over into an IRA. To make the most of your retirement savings, consider your options carefully.

Option	Pros	Cons
Roll over to new employer’s plan	Avoid early withdrawal penalties Money continues to grow tax-deferred	May have a limited number of investment choices May have limited ability to make exchanges among funds in your plan
Roll over to an IRA	Avoid early withdrawal penalties Money continues to grow tax-deferred Offers more options than employer plan	Can’t borrow against the assets May have to pay an annual fee
Leave in former employer’s plan	Avoid early withdrawal penalties Money continues to grow tax-deferred Retain the ability to roll over to an IRA or new employer’s plan at a later date	Can no longer contribute to former employer’s plan May have a limited number of investment choices May have limited ability to make exchanges among funds in your former plan
Take a cash distribution	Can provide cash when facing extraordinary financial difficulties	If you are younger than age 59½, you’ll face a 10% early withdrawal tax penalty and a 20% federal mandatory tax withholding Money no longer grows tax-deferred You may face goal shortfall risk—the risk that you won’t have enough money for retirement

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