What Happens to Your 401(k) When You Leave a Job
Your 401(k) doesn't disappear when you leave a job. Your own contributions are always yours. But a few rules kick in when you leave, and some of them have deadlines.
What you keep
Everything you contributed from your paycheck, plus its growth, is always 100% yours. Employer matching and profit-sharing contributions depend on your plan's vesting schedule. If you leave before you're fully vested, you forfeit the unvested part. Check your plan statement before you set your last day, because a few more weeks can sometimes make a difference.
Small balances can be moved for you
- Under $1,000: the plan can cash you out and mail a check. That money is taxable, and a 10% penalty may apply if you're under 59½, unless you roll it over within 60 days.
- $1,000 to $7,000: the plan can move it into an IRA in your name without asking, usually invested very conservatively. These accounts are easy to lose track of.
- Over $7,000: you can generally leave it in the plan as long as you like.
If you have a 401(k) loan
An unpaid 401(k) loan is often due when you leave. If it isn't repaid, the plan subtracts it from your balance as a "loan offset," which is taxed like a withdrawal. You can avoid that by depositing the same amount into an IRA by your tax filing deadline for that year, including extensions.
The rule of 55
If you leave your job during or after the year you turn 55, withdrawals from that employer's 401(k) aren't subject to the 10% early withdrawal penalty. This only applies to the plan at the job you left. If you roll the money into an IRA, you lose this exception.
Your four options
You can leave the money in the old plan, roll it into an IRA, move it into your new employer's plan, or cash it out. Cashing out is usually the costliest. Compare all four options, or use our calculator to see what cashing out would cost you.
This guide is general information, not tax or financial advice. Talk to a qualified professional about your situation.