What Do I Do With My 401(k) After Leaving My Employer?

(by Mark Kenan, eHow Contributor)

As you walk out the door for the last time with your old company, you may be running through a mental checklist of all the things you need to remember to take with you such as your old files, your pictures on your desk and your degrees hanging on your wall. Your 401(k) plan should also be on that list. Knowing your options helps you figure out the best choice for your retirement assets.

Leave It Alone
Your employer may permit you to leave the money in the 401(k) plan after you leave the company. If so, consider the plan’s investment options and fees before rushing to move your money. Sometimes bigger companies can negotiate lower fees on behalf of their employees so that you pay less than you would to have the money in an individual retirement account. In addition, if your old 401(k) plan holds employer stock, it is best to leave that portion of the 401(k) with the old company because of the special tax treatment on distributions.

Roll It Over
You can also elect to roll over the money in your 401(k) plan into another qualified retirement plan. If you move on to another job that offered a qualified plan, you may be able to roll over the money into that plan, if the plan rules permit it. You can also roll it into a traditional IRA so that you have more control over the money and you can combine it with your personal retirement savings. By rolling it into another tax-deferred plan, you generate no tax liability and you get to maintain the tax-sheltered status of the money.

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