You can move money from an old 401(k) into your current one, or roll it into an IRA

When you leave a job, your 401(k) stays with that employer's plan unless you move it. You have three main choices: leave it where it is, roll it into your new employer's 401(k) if they allow it, or roll it into an Individual Retirement Account (IRA). A rollover means moving the money from one account to another without cashing it out and paying taxes on it.

The simplest path for most people is a rollover into an IRA, because you control the account yourself and can keep adding to it as you change jobs. A rollover into your current employer's plan works too, but only if that plan accepts rollovers — not all do. Either way, the money moves directly from the old plan to the new one, so you never touch it and don't trigger taxes or penalties.

Key Takeaways

  • A rollover moves money from an old 401(k) to a new account without taxes or penalties, as long as the money goes directly from one institution to the other.
  • You can roll into your current employer's 401(k) if the plan accepts rollovers, or into a traditional IRA, which gives you more control over how the money is invested.
  • The rollover must be completed within 60 days if you take the check yourself, but a direct rollover (where the institutions handle the transfer) has no time limit.
  • You will need the account number and contact information for your old plan, and you should contact your new plan or IRA provider before starting to confirm they accept rollovers.
  • If your old 401(k) balance is under $5,000, the plan may force you to move it or cash it out when you leave the job.

Rolling into your current employer's 401(k)

If your new job offers a 401(k) and that plan accepts rollovers, you can move your old balance there. This keeps everything in a workplace plan, which some people prefer because employer plans often have lower fees than IRAs and offer borrowing options that IRAs do not.

Contact your new plan's administrator (usually through your HR or benefits department) and ask if they accept rollovers. If they do, they will give you the steps and the information you need to provide about your old account. You will need the name of the old plan, the plan number, and the account number. Your old employer's benefits office or the plan's website can provide these.

The new plan will then contact the old plan directly and request a transfer. This is called a direct rollover, and it is the safest method because the money never passes through your hands. There is no time limit for a direct rollover, and no taxes are withheld.

Rolling into a traditional IRA instead

An IRA gives you more flexibility than a 401(k) because you choose where to open it and how to invest the money. You can open an IRA at a bank, credit union, brokerage firm, or investment company. Many people choose this route because IRAs typically offer more investment choices and lower fees than employer plans.

Open the IRA first, then contact your old 401(k) plan and request a direct rollover to the IRA. Provide the IRA's name, account number, and routing information. The old plan will send the money directly to the new IRA. Again, this is a direct rollover, so there is no time pressure and no tax withholding.

If you already have an IRA from a previous job, you can roll the old 401(k) into that same IRA. This combines multiple accounts into one place, which makes it easier to track and manage your retirement savings.

What happens if you take the money yourself

Sometimes the old plan sends you a check instead of transferring the money directly. This is called an indirect rollover, and it comes with a strict rule: you must deposit the money into the new account within 60 days, or it counts as a withdrawal. You will owe income tax on the full amount, plus a 10% penalty if you are under 59½.

The old plan will also withhold 20% of the money for federal taxes before sending you the check. If you roll the full amount into the new account within 60 days, you get that withheld money back as a tax refund later. But if you miss the important date, that 20% is gone, and you still owe taxes on the full withdrawal.

For this reason, a direct rollover is almost always better. If the old plan offers a choice, always ask for a direct transfer to the new account.

Timing and what to expect

A direct rollover typically takes one to three weeks, depending on how quickly the old and new institutions process the transfer. During this time, the money is in transit and you cannot access it. Once it arrives in the new account, it is invested according to the account's settings.

If you are rolling into a new employer's 401(k), the money will be invested in whatever default fund the plan uses unless you choose differently. If you are rolling into an IRA, you may need to choose how to invest the money when you open the account. Ask the IRA provider what the default is if you do not make a choice.

Keep copies of all paperwork related to the rollover — the rollover request form, confirmation from the old plan, and confirmation from the new account. These documents protect you if there is ever a question about whether the rollover was completed correctly.

When your old plan forces you to move the money

If your balance in the old 401(k) is less than $5,000, the plan may force you out when you leave the job. The plan will contact you and give you a important date to move the money or take it as a distribution. If you do not act, the plan can cash it out and send you a check, which triggers taxes and penalties unless you roll it within 60 days.

If you receive a notice like this, treat it as urgent. Contact the old plan when ready and request a direct rollover to an IRA or your new employer's plan. Do not wait for the important date to pass.

Roth 401(k) and tax-deferred money: what you need to know

If your old 401(k) contains money from a Roth 401(k) (after-tax contributions), you can roll it into a Roth IRA, but only if you roll the Roth money separately from any pre-tax money. Pre-tax money must go into a traditional IRA. Mixing them creates tax complications.

If you are unsure whether your old 401(k) contains Roth money, pre-tax money, or both, ask the old plan for a breakdown before you start the rollover. The plan's statement will show this information, or you can call the plan administrator and ask.

Frequently Asked Questions

Can I combine multiple old 401(k)s into one IRA?

Yes. You can roll money from several old 401(k)s into a single IRA. Each rollover is a separate transaction, but they all go to the same account. This is a common way to consolidate retirement savings from multiple jobs into one place.

What if my old employer went out of business?

The 401(k) plan still exists and is managed by a third party, usually a financial services company. Contact your old HR department or search for the plan's name online to find the current administrator. They can process the rollover even if the company no longer operates.

Do I have to roll over the entire balance?

No. You can roll over part of the balance and leave the rest in the old plan, or take part as a distribution. However, a direct rollover of the entire balance is usually simpler and avoids the tax withholding that comes with partial distributions.

Will rolling over my 401(k) affect my current retirement contributions?

No. A rollover is a transfer of money you already saved. It does not change how much you can contribute to your current 401(k) or IRA going forward. Your contribution limits stay the same whether you roll over old money or not.

What if I have a loan against my old 401(k)?

You cannot roll over a 401(k) while you have an outstanding loan against it. You must repay the loan first. If you leave the job without repaying, the loan is treated as a distribution and you owe taxes and penalties on the unpaid balance.