4 Options for Your Old Employer Retirement Plan

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Should you roll over your old 401(k)?

If you’ve changed jobs or retired, you may still have retirement assets with your former employer. You have four options for taking control of your money: roll over into an Individual Retirement Account (IRA), leave your money where it is, move your assets to a new employer's plan, or cash out.

Option 1: Rolling over into an IRA


  • Rolling over an old 401(k) could give you the potential to take advantage of an array of investment options, including mutual funds and exchange-traded funds (ETFs), as well as individual stocks, bonds, and other products.
  • You can continue to actively contribute to your retirement savings and your investments will remain tax-deferred until they are withdrawn.
  • Consolidation may make tracking your assets and their performance easier, allowing you to manage a single account instead of multiple 401(k) plans.
  • With an IRA, you have access to your assets at any time. (Taxes and penalties may apply.)


  • While an IRA may offer a wide variety of investment options, it might not offer the same options as an employer plan, such as institutional share classes.
  • With an IRA, you cannot take a loan against your assets.
  • There is limited protection from creditors.
  • If you hold appreciated employer stock in your former plan and decide to roll over into an IRA, there could be tax consequences.
  • Minimum distributions are required from traditional IRAs beginning at age 70½. Forgetting to take the minimum distributions may result in a 50% IRS penalty on the amount not distributed as required.
  • Depending on the plan and the IRA, an IRA could cost more.

Option 2: Leaving your money where it is


  • Leaving your money in your old employee plan (if permitted) allows for continued tax-deferred growth potential. 
  • Some 401(k) plans give you access to institutional share classes, which could potentially cost less than other alternatives.
  • If you leave the money within a company retirement plan and ultimately leave that company after age 55, you will have penalty-free access to those funds immediately, versus waiting until age 59½ for 401(k) or 70½ for an IRA.
  • Plan assets generally have protection from creditors under federal law.


  • Once you leave your employer, you may no longer be permitted to make additional contributions to that plan, nor will you be allowed to take loans from the plan.
  • Some employers may charge higher plan fees if you are not an active employee.
  • Your previous employer may not allow you to remain in your former plan.
  • You'll only have access to the investment options allowed in the plan and may miss out on the convenience of consolidation.


Option 3: Move your assets into your new employer’s plan


  • Depending on its investment options and features, your new employer's plan may offer reduced fees and costs.
  • You can continue to actively contribute to your retirement savings. 
  • You may be able to take out a loan against your accumulated retirement assets, if your new employer plan permits it.
  • Some plans may allow you to withdraw money penalty-free between the ages of 55-59½. 
  • If you are planning to work beyond age 70½, you may be able to delay the required minimum distributions.


  • Your new employer plan may have higher fees or fewer investment choices compared to an old plan or an IRA. Some of these fees could include record keeping and administrative fees.
  • There may be a waiting period before you are allowed to roll over your old plan assets into a new plan.


Option 4: Cash out


  • The advantage of this option is the immediate access to cash to use for large expenses, such as a big credit card debt or other priorities.


  • Cashing out prior to age 59½ from your retirement plan counts as an early distribution. This means that there may be taxes and a 10% early withdrawal penalty.
  • You’ll be subject to a mandatory 20% withholding fee for federal income taxes and between 2% to 8% for state income taxes.
  • Investors who are considering taking a cash distribution of company stock should be aware of IRS rules that might allow them to defer paying taxes on the appreciation. This is typically referred to as "net unrealized appreciation."


Ready to take control of your old employer retirement plan with a Rollover IRA account?


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Want to learn more?

Our interactive rollover guide may help you evaluate your options so you can make an informed decision. You can also call 877-921-2434 to speak with an E*TRADE Retirement Specialist who will help you understand your choices and guide you through the process.