A 3-step checklist for your 401(k) when changing jobs

Changing jobs can bring on a roller coaster of emotions, but it’s also a great opportunity to review your overall retirement savings picture, including your 401(k). The first step is to take a deep breath – you can absolutely do this. You have options.

Research the benefits of IRAs

One option is to roll over your old 401(k) or other eligible retirement assets into an IRA. IRAs can offer flexibility so you can access a wide array of investments – including stocks, options, ETFs, fixed income and mutual funds – as your plans for retirement evolve. Rolling over, as opposed to taking a lump-sum distribution, also allows your retirement assets to maintain their tax-advantaged status.^,

You can use an existing IRA or open a new IRA to roll over your 401(k). It’s important to note the different contributions you or your employer may have made to your plan. Depending on the contributions your 401(k) allowed, a portion of your savings may be traditional (or pre-tax dollars), after-tax dollars, Roth or a combination of those types since you may need or want to roll over to a compatible IRA account. A Roth conversion may be a topic to discuss with your tax professional as well.

If, over the years, you’ve ended up with multiple IRAs, 401(k)s or other retirement assets, you may also choose to consolidate your retirement assets in one or more IRAs with the same firm. This move can help you track your retirement savings more easily.

Consider all your options

Other options may include staying in your former employer's plan, rolling over to your new employer's plan or taking a lump-sum distribution. Compare the pros and cons for each of these options. Consider which investments are available within each account, what fees you may have to pay and whether other factors apply, like the ability to borrow money from your 401(k) and the amount of access to (and the nature of) any advice.

Except for certain extenuating circumstances, taking a lump-sum distribution is often the least favorable option. Issues with taking a lump-sum withdrawal may include being subject to an early withdrawal penalty and taxes. You can speak with a tax or legal professional about your options. Another consideration is that employers may cash out or automatically roll over a past employee's 401(k) left in the employer’s plan with a balance under the plan’s minimum amount.

Make a decision

Whatever you decide, don’t forget about your 401(k) or other retirement assets. Consolidating retirement assets into an IRA may make it easier to maintain a holistic view and help with planning for retirement. According to Cerulli's research, over $1.6 trillion is left in prior employer 401(k) plans, with average balances over $100k. Some may not be aware that leaving a 401(k) with a prior employer is one of many options available.

And if you do decide to roll over? Rolling over your 401(k) may be intimidating initially, but having a trusted partner can go a long way to smooth the process. They may have tools that create a clear rollover experience with actionable next steps. Once you decide on what to do, take action by remembering that caring about your savings journey is caring about your future.

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