You have four basic options for handling your 401(k) when you leave your job, whether you quit, are laid off, or are fired:
- Leave it with your former employer's plan. As long as you have the minimum amount required (which varies from plan to plan), you can leave your money where it is. Of course, this means you can't make contributions to it any more. And, you'll have to keep track of the plan after you move on: Investiment options and fees may change, and you don't want to be taken by surprise.
- Roll it into a new 401(k). If your new job has a 401(k) plan, you can roll you money over into the new plan.
- Roll it over into an IRA. Remember, if you choose to start a Roth IRA, you'll have to pay tax on the money when you transfer it.
- Cash it out. This is probably the most tempting option, but it comes at a cost. If you withdraw your money, taxes will be withheld at a 20% rate. Also, unless you are already at least 59 and a half years old, you'll have to pay an additional 10% penalty, on top of the taxes.
As you can see, there are pros and cons to each option. The best strategy for you will depend on your financial situation, how much money you have in the account, your age, and other factors. You should get some expert advice before making a decision, particularly if there's a lot of money at stake.