If you’ve recently left your job, one of the biggest financial decisions you’ll face is what to do with your old 401(k). Should you roll it over into an IRA, move it to your new employer’s plan, or simply leave it where it is?
Each option has pros and cons—affecting your fees, investment choices, taxes, and long-term flexibility. The process can feel overwhelming, but the good news is that rolling over (or deciding not to) is simpler than most people think.
In this guide, we’ll break down:
- The main options for your old 401(k)
- When it makes sense to roll over vs. leave it
- How the rollover process works step by step
- Top providers for IRA rollovers
- My personal experience with making this choice
What Is A 401(k) Rollover?
A 401(k) rollover is when you move money from an old employer-sponsored retirement account into another tax-advantaged account, such as an IRA or a new employer’s 401(k).
There are two main types of rollovers:
- Direct Rollover (Recommended): Your old plan sends funds directly to your new account. No taxes withheld, no penalties.
- Indirect Rollover: Your old plan cuts you a check, and you have 60 days to deposit it into a new account. If you miss the deadline, the IRS treats it as a taxable distribution with possible penalties if you’re under 59½.
💡 Pro Tip: Always request a direct rollover to keep things simple and avoid an unexpected tax bill.
Should You Rollover or Keep It (Pros & Cons)
When you leave a job, you typically have three options for your 401(k): leave it, roll it into a new employer’s plan, or move it to an IRA. Here’s how they compare:
Option 1: Leave It with Your Old Employer
Pros
Cons
Option 2: Rollover to a New Employer’s 401(k)
Pros
Cons
Option 3: Rollover to an IRA
Pros
Cons
How To Rollover Your 401(k) Step-By-Step
Rolling over a 401(k) is easier than most people think. Here’s how it works:
- Choose your destination account → Decide if you want an IRA or your new employer’s 401(k).
- Open the account → For an IRA, choose a provider like Fidelity, Vanguard, or M1 Finance.
- Request a direct rollover → Contact your old plan provider and ask for funds to be transferred directly.
- Confirm the transfer → Check that funds are deposited into the correct account.
- Reinvest the money → Set up your investments according to your retirement strategy.
⚠️ Common Mistake: If you take an indirect rollover (a check made out to you), your old plan may withhold 20% for taxes. You’ll need to replace that money out of pocket to avoid penalties.
If that sounds challenging, your new provider (i.e. Fidelity or Vanguard) will usually handle everything for you. They will do the paperwork required, reach out to your old provider, get things transferred, and ensure that your new account is setup.
If even that sounds overwhelming, there are services available like Meet Beagle and Capitalize that will do it for you (sometimes for free).
Best Places To Rollover Your 401(k)
We have a list of the best IRA providers that have proven themselves for years. These companies are solid choices for where to rollover your 401k. They offer many of the same options, so it’s personal preference on where you want to invest.
To start the process, all you have to do is go to one of these companies, select “Open Rollover IRA” and provide your 401k information. The company will handle the rest.
|
Provider |
Best For |
Monthly Fees |
Features |
|---|---|---|---|
|
Fidelity |
All-around choice |
$0 |
Huge investment selection |
|
Vanguard |
Long-term index investors |
$0 |
Low cost index funds |
|
Schwab |
Those who may want to trade options |
$0 |
Commission-free trading |
Fidelity
Fidelity is a full service broker that is known as an industry leader. They offer a great no fee IRA account, and they offer a variety of commission-free investing options.
They even have mutual funds with zero expense ratios.
Open an account at Fidelity here >>
Vanguard
Vanguard has always been known as a market leader in low cost investing. However, when you move to Vanguard, you’re limited to Vanguard funds unless you pay much higher commissions.
Many companies are starting to strongly compete with Vanguard, but Vanguard is still a strong choice.
Open an account at Vanguard here >>
Charles Schwab
Schwab is another of the best brokerage firm out there, and they have been consistently adding new features that make them a compelling choice to have your IRA (with no monthly maintenance fees) along with basically every type of account you can imagine.
Tax Considerations And Common Mistakes
Before you roll over, consider:
- Traditional vs. Roth IRA → Rolling into a Roth triggers taxes now, but grows tax-free later.
- The Pro-Rata Rule → If you plan to use a backdoor Roth IRA, having a traditional IRA complicates things.
- 60-Day Rule → Miss the deadline on an indirect rollover, and you’ll face taxes + penalties.
- Account Closing Fees → Some brokers charge $100–$150 to close an IRA (check before moving).
My Personal Experience (Harry’s Story)
Recently, I left my employer of four years and one of the many things I had to consider was what to do with my 40(k). I never realized how much work it was to leave your job: I had to figure out which day I was going to quit on, where to do a 401(k) rollover, move my HSA, and I even had to get new health insurance.
Although I started off my career with contributions only up to the company match, I made sure to increase my contribution every time I got a raise or merit increase. After a couple years, I had finally maxed out my account and after four years, I had a pretty significant amount waiting for me.
Once I left my job, I was always planning on transferring my money to Vanguard where I hold my Roth IRA. But when it came time to do it, I felt like there were some things I wasn’t considering. I’ve only worked for one company since I graduated college so all of this was new to me.
I knew that I didn’t want to convert to a Roth since I’d have to pay taxes. And because I worked for a top Fortune 500 company, my 401(k) plan was pretty solid. They had a wide variety of choices and ultra low fees. Although there was a monthly $2.55 account maintenance fee, that only amounted to an additional expense of 0.03% on a $100,000 portfolio.
If my old plan would have had high fees or poor/expensive investment choices I would have definitely rolled it over, but having a good 401(k) plan made the decision a lot tougher (as long as I kept $1,000 in the account, the account would remain active).
Ultimately, I decided on keeping my 401(k) where it is right now. I’m not in any big hurry to get it out of there and complicate my life. Although I’ll now have two 401(k)s when I find a new job, if the new one ends up being similar I could just roll it over there. I won’t know for sure though if my new 401(k) accepts rollovers until I get a new job and take a look at their plan.
Common Questions
Can I roll over my 401(k) without penalty?
Yes, as long as you complete a direct rollover to an IRA or new 401(k), there are no penalties.
How long does a 401(k) rollover take?
Most transfers take 1-3 weeks, depending on the providers involved.
Can I roll my 401(k) into multiple IRAs?
Yes, but it’s usually best to consolidate for simplicity.
Is it better to rollover to an IRA or 401(k)?
It depends – IRAs offer more investment flexibility, but a 401(k) may be better for high earners using the backdoor Roth strategy.
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