How to roll over your 401(k)

January 21, 2020

What can you do with a 401(k) after you leave a job? Explore your options.

If you’ve recently left your job, you may be wondering what you should do with the funds in your 401(k). You have four options – cash it out, keep your 401(k) with your former employer, rollover your 401(k) into your new employer’s plan, or rollover your 401(k) into an IRA.

Explore the benefits and considerations of each option and consider talking with a financial professional to determine which might work best for you. 

1. Cash out your earnings

Benefits:

  • Immediate access to your money

Considerations:

  • Money not available for future retirement needs
  • May be subject to 20% federal income tax rate
  • May be subject to 10% federal tax for early withdrawals before age 59½
  • May be subject to state and local taxes


2. Leave funds in your former employer's retirement plan

Benefits:

  • Retirement investment continues to grow
  • Tax-deferred until withdrawal

Considerations:

  • Cannot make additional contributions
  • Subject to different rules than your new employer’s retirement plan
  • Investment options limited by former employer
  • Tax penalty for early withdrawals before age 59½


3. Transfer funds into your new employer's retirement plan option

Benefits:

  • Can continue to make new contributions
  • Ability to manage rolled-over money and new contributions collectively
  • Tax-deferred until withdrawal

Considerations:

  • Investment options limited by new employer
  • Tax penalty for early withdrawals before age 59½


4. Roll funds into an outside IRA, such as a robo-advisor account

Benefits:

  • Not restricted by your employer’s retirement plan
  • Tax-deferred until withdrawal
  • Direct rollovers from 401(k) to IRA will not incur federal income tax

Considerations:

  • Account fees may be higher than employer-sponsored plan
  • Tax penalty for early withdrawals before age 59½
  • Indirect rollovers may incur 20% federal income tax


Additional resources:

Get more details on 401(k) rollovers.

Learn more about the benefits of an IRA

Related content

4 financial considerations before changing jobs

IRAs simplified

What to do when you lose your job

A rollover of qualified plan assets into an IRA is not your only option. Before deciding whether to keep an existing plan, or roll assets into an IRA, be sure to consider potential benefits and limitations of all options. These include total fees and expenses, range of investment options available, penalty-free withdrawals, availability of services, protection from creditors, RMD planning, and taxation of employer stock. Discuss rollover options with your tax advisor for tax considerations.

Start of disclosure content

Investment and insurance products and services including annuities are:
Not a deposit ● Not FDIC insured ● May lose value ● Not bank guaranteed ● Not insured by any federal government agency.

U.S. Wealth Management – U.S. Bank | U.S. Bancorp Investments is the marketing logo for U.S. Bank and its affiliate U.S. Bancorp Investments.

The information provided represents the opinion of U.S. Bank and U.S. Bancorp Investments and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

U.S. Bank, U.S. Bancorp Investments and their representatives do not provide tax or legal advice. Each individual's tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

For U.S. Bank:

U.S. Bank does not offer insurance products but may refer you to an affiliated or third party insurance provider.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.

For U.S. Bancorp Investments:

Investment and insurance products and services including annuities are available through U.S. Bancorp Investments, the marketing name for U.S. Bancorp Investments, Inc., member FINRA and SIPC, an investment adviser and a brokerage subsidiary of U.S. Bancorp and affiliate of U.S. Bank.

U.S. Bancorp Investments is registered with the Securities and Exchange Commission as both a broker-dealer and an investment adviser. To understand how brokerage and investment advisory services and fees differ, the Client Relationship Summary and Regulation Best Interest Disclosure are available for you to review.

Insurance products are available through various affiliated non-bank insurance agencies, which are U.S. Bancorp subsidiaries. Products may not be available in all states. CA Insurance License #0E24641.

Pursuant to the Securities Exchange Act of 1934, U.S. Bancorp Investments must provide clients with certain financial information. The U.S. Bancorp Investments Statement of Financial Condition is available for you to review, print and download.

The Financial Industry Regulatory Authority (FINRA) Rule 2267 provides for BrokerCheck to allow investors to learn about the professional background, business practices, and conduct of FINRA member firms or their brokers. To request such information, contact FINRA toll-free at 1-800‐289‐9999 or via https://brokercheck.finra.org. An investor brochure describing BrokerCheck is also available through FINRA.

U.S. Bancorp Investments Order Processing Information.