What to do with the 401(k) you left behind.

When you leave a job, you have four options for the 401(k). The default — leaving it where it is — isn't always wrong, but it's rarely the best. Here's how we think it through with you.

Your four options

Option	What it means	When it makes sense
Leave it	Money stays in the old 401(k).	The old plan has institutional-class funds, low fees, and good options.
Roll to new 401(k)	Consolidate at the new employer.	The new plan is strong and you want one account.
Roll to a Rollover IRA	Move to a self-directed IRA.	You want broader investment choices and unified reporting.
Cash out	Take the money in hand.	Almost never. Triggers income tax + 10% penalty if under 59½.

When to roll to an IRA

You want a broader fund universe than the 401(k) offers.
You want all your retirement money in one place for planning and RMDs later.
You're past 59½ and may want flexibility with distributions.
Your old plan has limited investment options or high recordkeeping fees.

When to keep it in a 401(k)

The plan offers institutional-class funds — often cheaper than retail.
You may want to borrow against the 401(k) (loans aren't available from IRAs).
You're thinking about Backdoor Roth contributions — pre-tax IRA balances complicate those.
You're 55 or older and separated from service — the "Rule of 55" lets you withdraw penalty-free.
You have appreciated employer stock (look up "NUA" — Net Unrealized Appreciation).

The 60-day deadline

There are two ways to do a rollover. Pick the right one.

Direct rolloverMoney moves plan-to-plan or plan-to-IRA without touching you. No deadline, no tax withheld. Almost always do this one.

Indirect rolloverPlan sends you a check (with 20% withheld). You have 60 days to deposit the full amount (including making up the withheld 20% from your own pocket) — or it's a taxable distribution.

Watch the calendar. Miss the 60 days and you owe income tax on the whole amount, plus a 10% penalty if you're under 59½. The risk isn't worth the convenience.

Other things tied to the job

HSA — Keeps growing in your name. You can roll it to a new HSA or leave it.
FSA — Use it or lose it before your last day, with few exceptions.
RSUs / stock options — Vesting cutoffs and exercise windows can have hard deadlines, sometimes 90 days after separation.
Deferred compensation — Distribution schedules are usually locked in. Check the election.
Group life and disability — Usually end at separation; you may have a window to convert.
Pension or cash balance — Lump-sum vs. annuity decisions are often permanent.

A note from MPM

Call us before you call HR. Many decisions in the 90 days after leaving a job become permanent. We'll model the rollover options against your full plan, and walk you through the paperwork.

MPM Wealth Advisors · Plan. Invest. Thrive. mpmwealth.com · Updated May 2026

Sources: IRS Publication 575 (Pension and Annuity Income); IRS Publication 590-A (Contributions to IRAs); Internal Revenue Code §§ 402(c), 408(d)(3); U.S. Department of Labor fiduciary guidance under ERISA. Confirm current rules with IRS.gov before acting.