Whether you quit, were fired or got laid off, thinking about your employer-sponsored retirement plan might not be top of mind when you separate from a job.
But if you don’t make a plan, you could be leaving tens of thousands of dollars behind. There were approximately3.2 millionforgotten 401(k) plans in the U.S. in July 2025, totalling an estimated$2.1 trillionin assets, according to Capitalize, a digital platform that enables users to locate retirement savings.
The average balance of these orphan plans was nearly $67,000.
Even if you remember about your 401(k), you might not be sure what to do with it. The good news is you have time to decide. Even if your company automatically moves or cashes out plans with small balances, you’ll still have a 60-day window before that happens.
“The biggest mistake is not taking the time to weigh your options,” Jessica MacDonald, vice president of thought leadership at Fidelity, told CNBC Select. “And another mistake is to cash out and just not take an active role.”
If you’re not eligible for penalty-free withdrawals, there are options for dealing with a 401(k) when you leave a company, voluntarily or otherwise.
What to find out about your 401(k) first
- Before you decide how to handle your 401(k), see how much you have in the account. If there’s less than $7,000, it soon might be automatically cashed out or rolled over into an IRA.
- Write down the name of the plan administrator, the website URL and your login information. Change the primary email address to your personal email so you won’t lose access.
- See what the policies are for contributors who have separated from the company. Some options might not be available, you may have a deadline to make a decision by, or you may forfeit part of your 401(k) balance if you didn’t stay at your company long enough for it to be fully vested.
1. Keep the 401(k) where it is
The simplest thing you can do with your old 401(k) account is to leave it be, which requires no further action.
“Most companies allow you to do this so your money continues to grow in the investment option you selected when you first started work at that company,” MacDonald said.
The investments in it will still grow, and you’ll still be able to make penalty-free withdrawals when you turn 59½. But since you’re not an employee, you won’t be able to contribute any more, and since you’re not an active employee, the plan administrator may charge additional fees to manage the account.
You won’t be able to take out a 401(k) loan and your options for other kinds of withdrawals will be limited. In most cases, you can only cash out the account, not take out a partial withdrawal.
If you like theinvestment optionsyour old plan offers and don’t intend to touch it until retirement, there’s no harm in leaving it with your old employer. The burden will be on you to remember you have it, though.
If you have a 401(k) loan
If you borrowed money from your 401(k) and the loan is still active when you leave your job, you’ll need to pay the full balance by the tax deadline for that year. So, if you quit in January 2026 with a $10,000 balance, it must be repaid by April 14, 2027 (or Oct. 15, 2027 if you filed for an extension).
If you don’t, the balance becomes a “deemed distribution.” You’ll owe income tax and if you’re under age 59½, a 10% early withdrawal penalty.
2. Roll it over into your new employer’s plan
If your new plan allows it, rolling over your 401(k) means you only have one account to keep tabs on.
“Some people find that having just one 401(k) account makes it easier to see all their money in one place,” MacDonald said. “Ultimately, it comes down to convenience.”
Not entirely: Rolling it over to your current job also means you can delay taking required minimum distributions (RMDs) when you turn 73. The “still-working exception” allows you to postpone RMDs until April 1 of the year after you retire, but only if the account is with your current employer.
Before making any decision, compare investment options across both plans and pick the one that aligns more closely with your financial goals.
Direct vs. indirect rollover
There are two ways to transfer money from one 401(k) to another. The more preferred method is a direct rollover, where your old plan administrator sends the funds directly to the new one, avoiding the penalty and taxes that come with an actual withdrawal. You may receive a check in the mail, but it’s made payable to the new account provider, not to you.
In an indirect rollover, the money is paid to you first, and you must redeposit it in full into the new account within 60 days. The IRS requires a mandatory 20% withholding, so to avoid taxes, you’ll have to replace this 20% using your own money when you deposit the balance into the new plan
3. Roll it over into an IRA
Another option is to roll your 401(k) balance into a new or existing traditional or Roth IRA. You’ll have more control over where you invest your money, not just the commodities offered by your old workplace. And, since it’s not linked to your old employer, you won’t have to roll it over again if you change jobs in the future.
You’ll also be able to make penalty-free withdrawals for a first-time home purchase or to pay for higher education, even if you’re under 59½. (You’ll owe taxes on the amount you withdraw.)
You will miss out on the “still-working exception,” though, and have to start taking RMDs earlier.
4. Cash out your 401(k)
You can always cash out the balance of your old 401(k), but MacDonald calls that “an absolute last resort.”
“If you do it before age 59½, you’ll have to pay a 10% penalty and be subject to taxes,” she said.
Depending on how long you have before retirement and how much is in the account, you could also be sacrificing tens of thousands in compound interest over the next several decades.
If you’re in a serious financial bind, MacDonald suggests considering a personal loan, which will have less of a long-term impact.
Looking to consolidate debt or make home improvements? Consider these personal loan offers.
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FAQs
How long can I leave a 401(k) with my old company?
If you have more than $7,000 in your 401(k), your old employer can’t subject you to a “forced distribution — you can leave the funds there indefinitely. You do run the risk of forgetting about it, though.
If you have between $1,000 and $7,000, the funds can be rolled over into an IRA without your approval. If there is less than $1,000 in your old 401(k), your old company can automatically cash out your account and send you a check, which will count as a taxable distribution.
Each plan operates slightly differently, so it’s best to inquire directly with your plan administrator.
What is the 60-day rollover rule?
If you are making an indirect rollover of an old 401(k) balance, you typically have 60 days to deposit the money into a new eligible retirement account or else face taxes and penalties. There is a limit of one indirect rollover every 12 months.
Can I just leave my 401(k) with my former employer?
Many employers allow you to leave your funds in their sponsored plan after you leave, usually if it’s more than $7,000. Confirm that is an option and inquire about any rules or fees that may apply.
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Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Jessica MacDonald, vice president of thought leadership at Fidelity.
Based in Somerville, Massachusetts, Jessica previously worked as an independent communications consultant and an account supervisor at Brodeur, a Boston-based public relations firm. She graduated from James Madison University with a BS in speech communication
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