401(k) Rollover After a Layoff
You generally have a few options for an old 401(k). Understand the trade-offs before moving anything — and avoid cashing out reflexively.
Leave it in the old plan
Often allowed above a balance threshold. Simple, but you may have limited investment options and another account to track.
Roll to an IRA or new employer plan
A direct rollover avoids withholding and penalties. Compare fees, investment choices, and whether you want IRA flexibility or a workplace plan.
Cash out
Usually triggers income tax and, if under the age threshold, an early-withdrawal penalty. This permanently reduces retirement savings — weigh carefully.
Questions to confirm
- Can I leave the balance where it is, and is there a fee?
- Is a direct (trustee-to-trustee) rollover available to avoid withholding?
- How do fees and investment options compare across choices?
- What are the tax consequences if I cash out?
- Should I get advice from a CPA or fiduciary advisor first?
Related resources
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