So, what happens with my old 401(k)? You’ve changed jobs and left behind a sum of money. What can you do with it? There are four options when it comes to your old 401(k).

1. Leave It there

Depending on the size of your account, you may have the option to leave it where it’s currently invested. There are certain minimum amounts needed depending on the company to keep it there. If those minimum amounts aren’t met, you may be sent a check or assisted to roll it into an IRA (Individual Retirement Account).

• If you’re older than age 59, you can freely take distributions from you old 401(k) when you decide to live off your hard work from over the years.

2. Roll into Current Employer Plan

This may make sense when you have good investment choices and like the idea of consolidating accounts into one place. It gives you the freedom to utilize your current investment choices for your old funds. Generally, employer sponsored plans have 5-15 investment fund choices and some have even more if you’re lucky.

3. Roll into an IRA

If you don’t have access to a current employer plan or you simply want more investment choices, this is a great option. Being outside of the sponsored plan framework allows you to shop the open market ranging from individual bonds to mutual funds.

4. Cash it out

Although this is an option, it’s not the best one to follow through with. When you cash out your retirement account before 59 ½ , you pay a 10% Federal tax penalty on top of income tax for the sum. Tax rules around qualified investment accounts limit withdrawals without penalty until age 59 as of 2022.¹

¹irs.gov – Exceptions to Tax on Early Distributions

Before rolling over your retirement account, consider all available options, which include remaining with your current retirement plan, rolling over into a new employer’s plan or IRA, or cashing out the account value. When deciding between an employer-sponsored plan and IRA, there may be important differences to consider – such as range of investment options, fees and expenses, availability of services, and distribution rules (including differences in applicable taxes and penalties). Depending on your plan’s investment options, in some cases, the investment management fees associated with your plan’s investment options may be lower than similar investment options offered outside the plan.