I Just Got Fired and Need To Decide—Should I Roll My 401(k) Into an IRA or Wait?

Key Takeaways Leaving your 401(k) with your former employer keeps funds invested and growing tax deferred, but you can’t make new contributions. Rolling over the funds to an IRA gives you more investment choices, lower fees, and greater control over your savings. Transferring the funds to a new employer’s 401(k) can maximize employer matches and consolidate accounts, but new plans may have limited options or higher fees. When you leave a job, it's important to decide what to do with your 401(k) , because each option affects your taxes, fees, and long-term savings. Deciding what to do with the funds in your old employer's 401(k) depends on multiple factors, including your long-term goals.MaFelipe / Getty Images One Reddit user shared their experience when changing jobs: “My 401(k) is with Principal. I’m not fond of them. I haven’t talked to Principal yet because I had to pay off a loan on it. It was only $5,700. That should be processed in the next day or three. I should have a new job in 3-4 weeks. Principal says they have an option to just continue the 401. And of course I can roll it to an IRA. The new job has a 401(k), I assume standard 4% match. I don’t know who they use yet. Any advice on if I should roll to an IRA, keep that, and start a new 401 when I get the new job? Stay with Principal and consolidate once I have the new job? My current account is a bit shy of $600k. I have 20 years until retirement if I don’t retire early. Salary plus bonus is around $130k.” Making the right choice will depend on your long-term retirement strategy. As long as you have least $5,000 in your account-which this user does-you have a few options in addition to cashing it out. Option 1: 401(k) to IRA Rolling over a 401(k) into an individual retirement account (IRA) allows you to move savings from a previous employer’s plan into an IRA without triggering taxes or penalties, provided the transfer is handled properly. If you have a traditional (non- Roth ) 401(k), your savings remain tax-deferred investment earnings and aren’t taxed until you make withdrawals. You can keep making contributions and gain access to a broader selection of investment options. Still, you can only contribute $7,000 annually (or $8,000, if you're age 50 or older), which is significantly less than the $23,500 (or $34,750, if you're age 50 or older) 401(k) contribution limit in 2025. Those 401(k) limits are $24,500 and $35,750, respectively, in 2026. For high-income earners, transferring your funds to a traditional IRA can clear the way to open a Roth IRA through a backdoor conversion , allowing future growth and withdrawals to be tax free. However, existing pretax (traditional) IRA balances can make part of the conversion taxable due to IRS pro rata rules, so you'll want to ensure that the traditional IRA has a zero balance when contributing. If you transfer your funds...

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