NerdWallet, Inc. is an independent publisher and comparison service, not an
investment advisor. Its articles, interactive tools and other content are
provided to you for free, as self-help tools and for informational purposes
only. They are not intended to provide investment advice. NerdWallet does
not and cannot guarantee the accuracy or applicability of any information in
regard to your individual circumstances. Examples are hypothetical, and we
encourage you to seek personalized advice from qualified professionals
regarding specific investment issues. Our estimates are based on past market
performance, and past performance is not a guarantee of future performance.
We believe everyone should be able to make financial decisions with
confidence. And while our site doesn’t feature every company or financial
product available on the market, we’re proud that the guidance we offer, the
information we provide and the tools we create are objective, independent,
straightforward — and free.
So how do we make money? Our partners compensate us. This may influence
which products we review and write about (and where those products appear on
the site), but it in no way affects our recommendations or advice, which are
grounded in thousands of hours of research. Our partners cannot pay us to
guarantee favorable reviews of their products or services.
Here is a list of our partners.
What Happens to Your 401(k) When You Quit a Job?
In most cases, rolling over funds to another tax-advantaged account is the most logical move.
Many, or all, of the products featured on this page are from our advertising
partners who compensate us when you take certain actions on our website or
click to take an action on their website. However, this does not influence our
evaluations. Our opinions are our own. Here is a list of our partners and
here's how we make money.
The investing information provided on this page is for educational purposes
only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does
it recommend or advise investors to buy or sell particular stocks, securities
or other investments.
Updated · 4 min read
How is this page expert verified?
NerdWallet's content is fact-checked for accuracy, timeliness and
relevance. It undergoes a thorough review process involving writers and
editors to ensure the information is as clear and complete as possible.
Cara Smith is a lead writer at NerdWallet, where she writes about investing, cryptocurrency and auto loans. She has reported on commercial real estate, housing and general business for Houston Business Journal, CoStar News and other publications. She studied journalism and psychology at the University of Houston, where she served as the editor-in-chief of its student newspaper. She is based in Chicago, where she searches night and day for authentic Tex-Mex in the Midwest.
Kate Ashford is a writer, spokesperson, wealth management specialist (WMS™) and certified senior advisor (CSA®) who joined NerdWallet in 2021. Her work on personal finance, retirement and Medicare has been featured by The Associated Press, The Washington Post, MarketWatch, MSN, Fidelity and Apple News, among others. Previously, she was a freelance writer in personal finance for both consumer and business publications. She has a degree from the University of Virginia and a master’s in journalism from Northwestern.
At NerdWallet, our content goes through a rigorous editorial review process.
We have such confidence in our accurate and useful content that we let
outside experts inspect our work.
Laura McMullen assigns and edits content related to personal loans and student loans. She previously edited money news content. Before then, Laura was a senior writer at NerdWallet and covered saving, making and budgeting money; she also contributed to the "Millennial Money" column for The Associated Press. Before joining NerdWallet in 2015, Laura worked for U.S. News & World Report, where she wrote and edited content related to careers, wellness and education and also contributed to the company's rankings projects. Before working at U.S. News & World Report, Laura interned at Vice Media and studied journalism, history and Arabic at Ohio University. Laura lives in Washington, D.C.
Published in
Editor & Content Strategist
SOME CARD INFO MAY BE OUTDATED
This page includes information about these cards, currently unavailable on
NerdWallet. The information has been collected by NerdWallet and has not
been provided or reviewed by the card issuer.
When you quit a job, what happens to the money in your401(k) retirement account depends in part on how much is in it.
But here’s the big takeaway: That money is yours, and those savings stay with you whenever you quit a job.
If you have less than $1,000 in your 401(k)
If your 401(k) has less than $1,000 in it when you quit a job, the IRS allows the plan administrator to automatically withdraw your money and send you a check, minus 20% in taxes
You can initiate a rollover instead, which is a direct transfer of your money from your 401(k) account to another tax-advantaged retirement account, such as an individual retirement account (IRA) or your new employer’s 401(k). This move can defer the tax.
The easiest way to initiate a rollover is to contact your 401(k) administrator and have them handle it.
Communicate your preferences quickly, though. Many companies won’t delay closing the account and cutting you a check.
If you have between $1,000 and $7,000 in your 401(k)
If your 401(k) has between $1,000 and $7,000 when you quit, your employer may automatically move your money into anindividual retirement account, or IRA.
If you don’t have an IRA, some employers will automatically open an account for you and deposit your funds into the account
A big question when off-boarding from your old job is where you want your 401(k) money to go. Most people opt to rollover, usually to their new 401(k) plan or IRA. If that’s what you’d like to do, too, consider talking to both your old company’s benefits provider and the institution where the money will go next. Ask both sides about what the process looks like, what information they’ll need, and what timelines to expect.Last tip: If the money is going to be sent to you as a physical check to then be deposited into a retirement account, set a calendar reminder of when it should be received. Late deposits for those under retirement age could get hit with withdrawal penalties.
June Sham
Investing Writer
If you have at least $7,000 in your 401(k)
If your 401(k) account has at least $7,000 when you quit a job, your employer isn’t allowed to move your money without your consent
. What happens next is up to you. There are a few things you can do:
Roll over your money into a new retirement account.
Leave your money in your old 401(k).
Cash out your 401(k) — and potentially pay a 10% federal penalty.
Rolling your money into a new 401(k) or IRA
Instead of paying all those tax penalties for an early withdrawal, consider doing a rollover, which moves the money directly into another retirement account. There are two general types of rollovers:
A 401(k) rollover is the process of moving money from your 401(k) account into another retirement account. For example, say you’re leaving your job for a different position, and your new employer offers a 401(k) plan. You can roll the money in your old 401(k) into your new 401(k) (if your new employer’s plan allows rollovers) .
Alternatively, you can roll over your old 401(k) to an IRA. IRAs typically offer more investment options than 401(k)s do.
Whether you roll over your retirement savings into an IRA or new 401(k), moving your money to a single account can make it easier to manage and track. Keeping your old 401(k) open becomes one more account to manage.
How to do a rollover
First, contact the retirement plan administrators for your old 401(k) and the new retirement account — either your new 401(k) or an IRA. Tell them you’d like to roll over your funds.
Next, they’ll collect information from you and initiate a direct rollover, which means one institution directly transfers funds to the other institution.
🤓Nerdy Tip
In an “indirect rollover,” the 401(k) plan administrator sends you a check, and then you personally deposit the check into the other retirement account. In that case, your plan administrator will likely withhold 20% of your 401(k) funds for taxes. You have 60 days to deposit the entire amount — including the amount withheld for taxes — into the new account. In other words, you’ll need to come up with the 20% portion yourself (theoretically you get a tax refund for that amount at tax time). If you miss the 60-day deadline, you end up paying the early withdrawal penalty and income taxes on the distribution.
If you move money from your old 401(k) account to a Roth IRA — a specific kind of IRA — you’ll have to pay income tax on that transfer, according to the IRS. (This doesn’t apply if you’re rolling over your funds from a Roth 401(k), though.)
NWWP is an SEC-registered investment adviser. Registration does not imply skill or training. Calculator by NerdWallet, Inc., an affiliate, for informational purposes only.
Leaving your money in your old 401(k)
Another option? Do nothing.
Although leaving your 401(k) on autopilot is the simplest option, it may not be in your best interest. Assuming you’ll continue investing in another account or a new 401(k) at your next employer, it will be harder to track your finances in more places.
Also, once you leave the job that set up the 401(k) account, you can’t make any more deposits into that account. And some 401(k) plan providers may charge you fees if you’re no longer an active employee
NerdWallet writers are subject matter authorities who use primary,
trustworthy sources to inform their work, including peer-reviewed
studies, government websites, academic research and interviews with
industry experts. All content is fact-checked for accuracy, timeliness
and relevance. You can learn more about NerdWallet's high
standards for journalism by reading our
editorial guidelines.
