USNews has an interesting take on moving around your old 401(K). They do a really nice job of breaking down the 4 options you have when it comes to that old 401K that we almost all have. When you leave a job, you have four options for your 401(k) plan balance:
1. Leave it. Not really the wisest move as the money will, in my opinion, just be stagnant. There is nothing more going into it from your end or from a match plan if you were lucky enough to have one.
2. Move it to your new employers 401(k). This makes more sens as you can still contribute to it, and again, if you are lucky enough, have the matching program. this also comes with some paperwork problems. It’s a lot of work for the new employer and a lot of hours, so not too many companies push for this, as they are penalized if something were to go wrong.
3. Roll it over into an IRA. I would have to say that this is the popular choice. The majority of 401(k) plans do not have an income for life option, so moving over into a product with guarantees makes a lot of sense.
4. Cash it out. Huge No No. The penalties are pretty big here. You’ll be taxed on the money to start with, then the IRS will hit you with an additional 10% penalty for early withdrawal if you are under the age of 59 and a half.