“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo.
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve kept this reputation for more than 40 years by making it easier for people to make financial decisions and giving them confidence in what to do next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our reporters and editors focus on the things that people care about most, like how to save for retirement, how to pick investments, and more. This way, you can feel good about planning for the future. Bankrate logo.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. We want to give readers information that is both correct and fair, and we have editorial standards in place to make sure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
It’s fun to change jobs, but there’s a lot of paperwork and decisions to make. “What should I do with my 401(k), and how long do I have to figure it out?” is one of the most important money questions you’ll have to answer.
If you’re staring at your resignation letter and wondering about your retirement savings, you’re in the right place. I’ve helped dozens of friends navigate this process, and trust me – understanding your timeline and options can save you thousands in taxes and penalties.
The Short Answer: Your 401(k) Timeline After Leaving a Job
To get right to the point, you don’t have to decide right away what to do with your 401(k) when you quit your job. If you choose an indirect rollover, on the other hand, and get the money directly, you have 60 days to put it in a new retirement account to avoid taxes and fees.
There is more to the story, though, and getting this right is VERY important for your money!
What Happens to Your 401(k) When You Leave a Job?
Before we get into dates, let’s talk about what happens to your account when you quit or are fired:
If Your 401(k) Balance is Less Than $1,000
If you have less than $1,000 in your 401(k), your former employer might cash you out automatically and send you a check. This isn’t ideal since:
- You’ll owe income taxes on this amount
- If you’re under 59½, you’ll also pay a 10% early withdrawal penalty
- The plan is required to withhold 20% for federal taxes
If Your 401(k) Balance is Between $1,000 and $7,000
With a balance between $1,000 and $7,000, your employer might automatically roll your money into an IRA in your name (known as a “forced distribution” or “automatic rollover”) The SECURE Act 2.0 increased this threshold from $5,000 to $7,000 in 2024
If Your 401(k) Balance is $7,000 or More
Good news! With $7,000+ in your account, your former employer generally can’t force you out of the plan. You can keep your money where it is indefinitely in most cases, giving you time to decide what to do with it.
Your 4 Main Options for an Old 401(k)
When leaving a job, you’ve got 4 primary choices for your retirement savings:
- Leave it with your former employer
- Roll it into your new employer’s 401(k)
- Roll it into an IRA
- Cash it out (usually not recommended!)
Each option has different timelines and considerations. Let’s break ’em down.
Option 1: Leave Your Money Where It Is
Timeline: No rush! If your balance is $7,000 or more, you can typically leave your money in your old employer’s plan for as long as you want.
Pros:
- No immediate action needed
- Your money continues growing tax-deferred
- Federal bankruptcy protection remains in place
- You maintain access to your current investment options
Cons:
- You can’t make new contributions
- You might face higher fees as an ex-employee
- You’ll have to track multiple accounts if you change jobs frequently
- Required Minimum Distributions (RMDs) must be calculated separately for each old 401(k) starting at age 73
Option 2: Roll Into Your New Employer’s Plan
Timeline: No strict deadline, but best to decide within 60-90 days of starting your new job so you don’t miss out on potential matching funds.
Pros:
- Consolidates retirement accounts in one place
- Continues tax-deferred growth
- Maintains strong creditor protection
- May delay RMDs beyond age 73 if you’re still working at that employer
Cons:
- Not all employers accept rollovers
- Your new plan might have limited investment options
- You’ll need to liquidate current investments and reinvest them
- You’re subject to the new plan’s withdrawal rules
Option 3: Roll Into an IRA
Timeline: No strict deadline for initiating, but if you choose an indirect rollover (where you receive the funds), you must complete the process within 60 days to avoid taxes and penalties.
Pros:
- More investment options than most employer plans
- No job change will affect this account in the future
- Easier to manage RMDs (can aggregate from all IRAs)
- More flexibility for withdrawals
Cons:
- May lose some creditor protections
- Potentially higher fees than employer plans
- RMDs required at 73 regardless of employment status
- You’ll need to actively manage investments
Option 4: Cash Out
Timeline: Immediate access to funds, but comes with significant downsides.
Pros:
- Immediate liquidity
- No penalties if you leave your job during or after the year you turn 55
Cons:
- Mandatory 20% federal tax withholding
- Likely additional income taxes
- 10% early withdrawal penalty if you’re under 59½
- Significant setback to your retirement goals
The 60-Day Rollover Rule: The Most Important Timeline to Know
If you decide to move your 401(k) money and the distribution check is made out to you (indirect rollover), you’ve got exactly 60 days to deposit those funds into another qualified retirement account. Miss this window, and you’ll face:
- Income taxes on the entire amount
- A 10% early withdrawal penalty if you’re under 59½
- The loss of tax-advantaged growth on that money
That’s why most financial advisors recommend a direct rollover (sometimes called trustee-to-trustee transfer), where the money moves directly between plan administrators without you receiving a check. This approach avoids the mandatory 20% tax withholding and eliminates the 60-day deadline pressure.
Vesting Considerations: Will You Get All Your Money?
One important factor in your decision timeline is vesting. When you leave a job, you’re always entitled to 100% of your own contributions, but you might not get to keep all of your employer’s contributions.
Your vesting schedule depends on your company’s policy:
- Immediate vesting: You own 100% of employer contributions right away
- Graded vesting: You gradually earn ownership (like 20% per year)
- Cliff vesting: You get 0% until you reach a certain anniversary, then 100%
If you’re close to a vesting milestone, it might make financial sense to delay your departure from the company. I’ve seen people miss out on thousands by leaving just weeks before their next vesting date!
Special Timeline Consideration: Outstanding 401(k) Loans
If you have an outstanding 401(k) loan when you leave a job, the timeline gets much tighter. Thanks to the 2017 Tax Cuts and Jobs Act, you now have:
Until your tax return deadline (including extensions) of the following year to repay the loan to an IRA.
If you don’t repay it within this timeframe:
- The outstanding loan balance becomes a distribution
- You’ll owe income taxes on that amount
- You’ll likely face a 10% early withdrawal penalty if under 59½
What About Converting to a Roth IRA?
If you’re considering rolling your traditional 401(k) into a Roth IRA, there’s no specific deadline, but you should know:
- You’ll pay income taxes on the converted amount in the year you convert
- The first Roth IRA conversion starts a 5-year holding period before earnings can be withdrawn tax-free
- You may be pushed into a higher tax bracket depending on the amount converted
My Personal Tips For Handling Your 401(k) After Leaving a Job
Having guided several friends through this process, here are my top practical tips:
-
Don’t rush the decision. Unless your balance is under $7,000, you generally have time to consider your options.
-
Gather your account info before leaving. Make sure you have login credentials, account numbers, and contact information for your plan administrator.
-
Compare fees across options. Request the participant fee disclosure for both your old and new plans, and compare these with potential IRA providers.
-
Consider consolidation. Managing multiple retirement accounts across different employers can get confusing. Sometimes simplifying is worth it!
-
Never cash out if possible. Despite the temptation for a windfall, the tax hit and setback to your retirement is rarely worth it.
-
Use direct rollovers. Avoid having the check made out to you to prevent the 60-day countdown and mandatory 20% withholding.
-
Keep good records. Document all communications about your rollover, including who you spoke with and when.
-
Be extra careful with company stock. If you have company stock in your 401(k), consult a tax professional before moving it, as special tax rules might apply.
The Bottom Line
While there’s no one-size-fits-all deadline for moving your 401(k) after leaving a job, understanding the timelines and consequences of each option is crucial. Your retirement savings represent years of hard work and sacrifice – don’t let a missed deadline or hasty decision derail your financial future.
The most important thing to remember is that if you take possession of your retirement funds through an indirect rollover, the 60-day clock starts ticking immediately. For most other decisions, you have much more flexibility to weigh your options carefully.
Have you recently changed jobs? What did you decide to do with your old 401(k)? Share your experiences in the comments below!
Disclaimer: I’m not a financial advisor, and this information is based on my research and personal experience. Everyone’s financial situation is unique, so consider consulting with a qualified financial professional before making decisions about your retirement accounts.
Rolling into an IRA? Stay on top of the move
If you decide to roll over your 401(k) into an IRA, your IRA sponsor or advisor will help guide you through the process to ensure the money gets to the proper destination in a timely manner. (The same 60-day deadline to re-invest applies here as well. ).
Be sure your new broker or advisor has experience with rollovers, especially if you have company stock in your 401(k). Why? Because company stock is liquidated when it’s rolled into an IRA, and later, when distributed, may be taxed as ordinary income resulting in a higher tax liability.
As we already said, stay alert until you have proof that your money is safely in its new home. This can usually be done online through the website of the IRA provider.
Keep tabs on the old 401(k)
If you leave an account with a company you used to work for, make sure you keep up with both the account and the company. An ex-co-founder of HC Financial Advisors in Lafayette, California, Peggy Cabaniss says, “People change jobs a lot more than they used to.” “So, it’s easy to have this string of accounts out there in never-never land. ”.
Cabaniss recalls one client who left an account behind after a job change. Fifteen years later, the company had gone bankrupt. While the account was protected and the money still intact, getting the required company officials and fund custodians to sign off on moving it was a protracted paperwork nightmare, she says.
“When people leave this stuff behind, the biggest problem is that it’s not consolidated or watched,” says Cabaniss.
If you do leave an account with a former employer, keep reading your statements, keep up with the paperwork related to your account, keep an eye on the company’s performance and be sure to keep your address current with the 401(k) plan sponsor. (Here’s how to find other unclaimed money.)
Keeping on top of how the plan is performing is important, as you may later decide to do something different with your hard-earned money.
What Do I Do With the 401(k) From My Old Job?
FAQ
What happens if you don’t transfer your 401k after leaving your job?
After your money is taken out of your old plan, you have 60 days to put it back into a new retirement account. If this does not occur, you can be hit with tax liabilities and penalties.
How long can my 401k stay with my previous employer?
Your 401(k) can stay with your previous employer indefinitely, even after you leave the job, as long as you have at least $7,000 in the account and choose to leave it there. However, if your balance is below this threshold, your employer may automatically roll the funds into an Individual Retirement Account (IRA) or cash it out, which could result in taxes and penalties if not handled properly.
Is there a time limit to transfer a 401k?
Yes, there is a time limit for some 401(k) transfers, specifically for indirect rollovers, which must be completed within 60 days of receiving the distribution. You don’t have to wait 60 days if you do a direct rollover, which means the money goes straight from the old plan to the new one.
How much will $10,000 in a 401k be worth in 20 years?
A $10,000 401(k) investment could be worth anywhere from about $37,000 to over $67,000 in 2020, depending on the annual rate of return, which can be anywhere from 5% to 10%.
What should I do with my 401(k) after leaving a job?
1. If you have an outstanding 401 (k) loan 2. What to do with your 401 (k) after leaving a job 3. How long do you have to move your 401 (k) after leaving a job? 4. Compare plan costs 5. Keep tabs on the old 401 (k) 6. Follow the money 7. Rolling into an IRA? Stay on top of the move 8. Cashing out a 401 (k) is popular, but not so smart
How long can a company Hold Your 401(k) after you leave a job?
Ultimately, how long a company can hold your 401 (k) after you leave a job depends on how proactive the employer wants to be about removing old participants from their 401 (k) plan. “Some employers pay per-head fees and they want to save money by getting former employers out,” says Pritchard.
How long can I roll over my 401(k) after leaving a job?
Note that this does not mean you only have 60 days to roll over your 401 (k) after leaving a job. This time limit only applies to indirect rollovers.
Should I Leave my 401(k)?
If you have more than $7,000 invested in your 401 (k), most plans allow you to leave it where it is after you separate from your employer. 2 If you have a substantial amount saved and like your plan portfolio, then leaving your 401 (k) in the account may be a good idea.
Can I move my 401(k) to a new IRA?
You generally won’t have a finite amount of time to move your 401 (k) to another 401 (k) or an IRA. You could decide to keep the money in your current 401 (k) but change your mind later and roll the money over or cash it out. One potential exception is if you’re leaving a company that won’t allow you to keep your 401 (k) balance there.
Can I roll over my 401(k) if I leave a company?
Here are the options you can choose from. If you change companies, you can roll over your 401 (k) into your new employer’s plan, if the new company has one. Another option is to roll over your 401 (k) into an IRA. You can do this if you are laid off from a company or if you choose to leave for a different job or career.