If you’ve switched jobs recently, you’re in good company. Approximately 14.8 million, or 22%, of active and contributing defined-contribution participants will change jobs each year, according to research from the Employee Benefit Research Institute (EBRI).1 This means a lot of people have 401(k)s with a previous employer. The big question you must consider when you change jobs is: What should I do with my old 401(k)?
Option 1: Do nothing/leave your money in your previous employer’s 401(k)
When you separate from service with an employer, most 401(k) plans will allow you to leave your money in the plan as long as your account balance meets a minimum requirement (e.g., $5,000 or something along those lines). Leaving your money in your previous employer’s 401(k) is worth considering if you like the investment options and if the fees are reasonable. In addition, if your 401(k) isn’t fully vested when you leave your employer, you may consider leaving your money in the 401(k) if there’s any chance you could go back to that employer. In many cases, this would allow your vesting schedule to pick up where you left off.