6 Reasons Not to Leave a 401(k) Behind When You Switch Jobs

Rolling retirement savings into a new account can mean more investment options, less hassle

Tamara E. Holmes,

AARP

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Published September 02, 2025

a piggy bank looks at a figure carrying a box out of an office

Jon Krause

If you haven’t changed jobs in a while, there’s a good chance you will. The average American has held 12 jobs by the time they turn 56, according to the U.S. Department of Labor, and nearly half of U.S. managers surveyed in January said their companies were likely to lay off employees in 2025.

A job switch doesn’t just change your income; it can also affect your ability to save for retirement. Nearly 6 in 10 U.S. workers have access to a 401(k) plan through their employer. If you’re one of them, you typically have three options when you change jobs: Roll the old 401(k) into another retirement account; cash it out (and pay taxes and a 10 percent penalty if you’re under age 59½); or leave it where it is, with your ex-employer.

A substantial number go with option three. According to Capitalize, a company that facilitates retirement-account transfers, Americans have left nearly 30 million 401(k) accounts worth approximately $1.65 trillion with previous employers.

Some workers making a move get so caught up in the career transition that they forget to move the account, says Scott Goldberg, president of the consumer division at CNO Financial Group in Carmel, Indiana. “They’ve got a lot going on, and they’re not thinking about their 401(k),” he says. Others may be unaware of their options or unsure how to transfer the account.

While money left in a former employer’s plan remains invested and can still grow, financial advisers warn that leaving it behind could hurt you financially in the long run.

“Your 401(k) isn’t just an account, it’s a tool to fund the next 20 to 30 years of your life,” says Linda Jensen, owner of Heart Financial Group in Olympia, Washington. “What you do with it when you leave a job matters.”

Here are some of the risks to moving on without your plan — and what to do instead.

1. You might forget about the account

Jason Fannon, senior partner with Cornerstone Financial Services in Southfield, Michigan, often gets calls from clients who have discovered stray accounts they’d lost track of.

“I'm working on a case like that right now, with a client where he’s got quite a bit of money [in the old account] and he didn’t even realize how much money was in it,” Fannon says. “He’s like, ‘I haven’t looked at this in eight years.’ ”

Even if you remember you left an account with a former employer, you might lose track of how to reach plan administrators. You may no longer have access to account portals or company benefits information. According to Capitalize, more than half of savers who rediscover or try to do something with an old account are initially unsure which financial institution holds the account. Tracking it down can be even harder if your ex-employer has gone out of business or merged with another company.

If your old retirement account is out of sight and out of mind, you’re also less likely to update your beneficiaries to accommodate changes in your living or family situation. “Sometimes our beneficiaries change as we get married or divorced, or new people come into our lives,” Fannon says. An ex-spouse could end up gaining access to an old account, leaving your loved ones without the financial support they need.

2. You could be limiting your investment options

For rollovers, you typically have two options: You can move the money into your new employer’s 401(k) plan (if they offer one), or you can open an individual retirement account (IRA).

IRAs typically have more investment options than 401(k) plans do. While 401(k)s generally limit your choices to a set of mutual funds, IRA investment choices often include individual stocks and bonds, exchange-traded funds and alternative assets, such as real estate and gold, says Jeff Hunter, a wealth strategist with TD Wealth.

“That provides you with better overall portfolio diversification and also the ability to customize investments to reflect your specific risk tolerance and your specific personal needs,” Hunter says. Some of your investments may do well when others are losing money, helping protect your assets against volatile markets.

3. You could be making your life more difficult

If you change jobs five times and leave a retirement plan behind each time, you could end up with 401(k) accounts scattered across the country. From a practical standpoint, “having one plan is easier to manage than two,” says Hunter.

For one thing, recordkeeping becomes harder with multiple accounts. You have several account passwords to remember, and tracking how all your investments are doing can be a challenge. Consolidating those plans into one account can help you better gauge how your nest egg is growing and whether you’re on track to reach retirement goals, Fannon says.

4. You could forget to take an RMD

Once you turn 73, you are responsible for taking required minimum distributions (RMDs) — mandatory annual withdrawals from your retirement savings. If you miss an RMD or withdraw less than the required amount, the IRS can levy a 25 percent excise tax on the shortfall.

Your RMD is based on the total amount in all your taxable retirement accounts (Roth accounts don’t count), so a forgotten pot of money can throw off your withdrawal calculation and trigger a penalty. “That can trip people up when they have so many accounts,” Jensen says.

5. You could lose control of the account

Once you leave your employer, you typically lose access to support when it comes to overseeing your 401(k) plan. “You’re left on your own to manage the account,” Jensen says.

You could also be at the mercy of corporate changes. “What if your former employer decides to sell the company or merge with another company?” Hunter says. “Maybe they go bankrupt, and they’ve lost touch with you. You may be stuck with a situation where they’re going to either cash you out of the plan if they can’t contact you or maybe put you into the new company’s plan, which may be much less favorable.”

6. You could be paying more in fees

Workplace retirement plans charge administrative, investment and other fees, some of which compound over time because they are based on a percentage of the amount in the account. With two or more 401(k) plans, you’re paying the fees for each, and some plans cost more than others.

“Depending on your plan, you could be paying more fees than you would be otherwise,” Goldberg says.

Rollover options

If you have less than $7,000 saved in the account, you may not have the option to keep the money in your former employer’s plan. In that case, you’ll either need to cash out, which could create a hole in your retirement savings, or roll the money into another retirement account.

If you choose a rollover, the first decision is whether to move the money into a new workplace account (if your new workplace offers one) or an IRA. If you anticipate changing jobs again, an IRA may be a better option, Fannon says — each time you leave a position, you simply move the related 401(k) into that personal account.

Wherever you decide to roll the money, Goldberg recommends having your former employer handle the transaction directly. “You never touch the money. It’s going from one [retirement plan] administrator to another,” he says.

Convenience isn’t the only reason to do this. If you receive the money yourself, you have 60 days to deposit it into another retirement account; if you miss the deadline, the IRS will consider it a withdrawal and assess taxes and penalties.

If you suspect you have an old 401(k) account (or accounts) floating around, check the U.S. Department of Labor’s lost and found database for retirement plans. This online tool can help you search for plans that still owe you benefits and find contact information for plan administrators.

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Tamara E. Holmes is a Washington-based writer and editor. She has written extensively about money, entrepreneurship and careers for more than two decades. Her work has appeared in such publications as USA Today, Working Mother and Essence.