# What Happens to Your 401(k) When You Leave Your Job? 

*Career Advice | CyberCoders*

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Switching jobs and employers is exciting. But with this change comes logistical hurdles and important considerations — like what you’ll do with your retirement plan from your previous employer.&nbsp;&nbsp; Put simply, those changing jobs and moving to a new employer will have one of four options for managing their 401(k) funds:&nbsp; Roll the 401(k) into the new employer’s plan Roll the 401(k) into an IRA Leave the 401(k) where it is Cash out the 401(k) To help you better understand these choices, you’ll find a summary of the pros and cons of each of the four options below.&nbsp;&nbsp; 1. Roll the 401(k) into your new employer’s plan If your new employer offers a 401(k) plan, you’ll likely have the option to roll (think transfer) your existing funds into your new employer’s plan. This approach helps consolidate your funds — making it easier to manage your investments.&nbsp;&nbsp; Pros:&nbsp;&nbsp; As mentioned, consolidating your finances into a single place makes it easier to manage them Consolidating finances can also help lower administrative fees Cons:&nbsp;&nbsp; Whenever you make use of a plan owned by an employer, your investment choices are more limited It can be frustrating and a hassle to complete the paperwork and get the rollover process completed 2. Roll 401(k) into an IRA If you are looking for greater control over your investments, or if your new employer doesn’t offer a 401(k) plan, you may want to roll your old 401(k) funds into an IRA account.&nbsp;&nbsp; Pros:&nbsp;&nbsp; An IRA account will generally offer you a wider range of investment options, including stocks, bonds, exchange traded funds (ETFs) and mutual funds This approach also allows you to choose the financial institution that manages your IRA, which allows for greater customization and lower fees Cons:&nbsp;&nbsp; Unlike some 401(k) plans, you cannot take a loan against an IRA Some IRAs may have higher fees than employer-sponsored plans 3. Leave the 401(k) where it is The simplest option of the bunch is just to leave your 401(k) where it is. Doing so will allow your funds to continue growing tax-deferred until retirement.&nbsp;&nbsp; Pros:&nbsp;&nbsp; Continued, tax-deferred growth of your funds Lower fees compared to other individual investment accounts, like an IRA Cons:&nbsp; A loss of control over the plan because you no longer contribute to it, and it’s controlled by your previous employer Some plans require a minimum balance to remain in the plan if you no longer work for the employer that owns it 4. Cash out the 401(k) Your final option, and probably the least advisable of the bunch, is to cash out your old 401(k). Cashing out your funds early can result in substantial taxes and penalties, diminishing the amount you’d ultimately pocket.&nbsp;&nbsp; Pros:&nbsp;&nbsp; Really the only benefit here’s immediate access to cash Cons:&nbsp; Consequences can be significant if you are withdrawing your funds early Cashing out also means you’ll lose out on the compounding growth of your investments In short, you should carefully consider what to do with your 401(k) when switching employers. This consideration should include an evaluation of your financial situation, retirement goals, and the specifics of your current and potential future employment.&nbsp; Are you looking to switch jobs? See who is hiring at CyberCoders.com.&nbsp;&nbsp;

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