4 Options for Your Old Workplace Retirement Savings

Why This Decision Matters

When you leave a job — whether you're retiring, changing careers, or stepping back — your workplace retirement savings don't just disappear. You have to decide what happens to that money.

The four main options are:

• Leave the money in your former employer's plan
• Move it to a new or current employer's plan
• Roll it into an Individual Retirement Account (IRA)
• Cash it out

Three of those options keep your money growing tax-deferred, meaning you don't pay taxes on it until you withdraw it in retirement. The fourth — cashing out — can cost you significantly right away.

Option 1: Leave Money in Your Former Employer's Plan

Many employers let you keep your retirement savings in their plan even after you leave. This can be a simple choice if you're happy with the plan's investment options.

Benefits:

• Your money continues to grow tax-deferred.
• Federal law protects the funds from creditors.
• If you left the job at age 55 or older, you can make penalty-free withdrawals.

Things to watch:

• You cannot add more money to the plan.
• Some plans charge a fee to maintain your account.
• If your balance is $1,000 or less, the plan may automatically send you a check. Balances up to $7,000 may be rolled into an IRA on your behalf.
• After age 73 (or 75 if you were born on or after January 1, 1960), you must take required minimum distributions (RMDs) — a set amount you must withdraw each year from a traditional retirement account.

Option 2: Move Money to a New Employer's Plan

If your new employer offers a retirement plan and allows incoming rollovers, you can consolidate your old savings there. This keeps everything in one place.

Benefits:

• You can keep making tax-deferred contributions through your new job.
• Federal creditor protections apply.
• If you're still working past age 73, you may be able to delay RMDs.
• Penalty-free withdrawals are available if you leave that job at age 55 or older.

Things to watch:

• Investment choices in the new plan may differ from your old one.
• Fees and rules vary by plan — review them carefully before rolling over.
• If you're self-employed or run a small business, you may be able to move money into a self-employed 401(k), SEP IRA, or SIMPLE IRA.

Option 3: Roll Money Into an IRA

An IRA (Individual Retirement Account) is an account you open on your own through a bank or brokerage — not through an employer. Rolling your old workplace savings into an IRA is a popular choice.

Benefits:

• Your money keeps growing tax-deferred.
• IRAs often offer a wider range of investment options than employer plans.
• You may be able to make after-tax contributions that are tax-deductible.

Things to watch:

• After age 73 (or 75 if born on or after January 1, 1960), you must take annual RMDs from a traditional IRA — even if you're still working. Roth IRAs generally do not require RMDs.
• Penalty-free withdrawals before age 59½ are more limited than in an employer plan. In an employer plan, you can withdraw penalty-free at age 55 if you've left that job; with an IRA, you generally must wait until 59½.
• Federal creditor protections are stronger for workplace plans than for IRAs. State protections for IRAs vary.
• For 2026, the IRS contribution limit is $24,500 for workplace plans and $7,500 for IRAs. Income limits apply to tax-deductible IRA contributions.

Option 4: Cash Out Your Savings

Cashing out means withdrawing all or part of your retirement savings as a lump sum. This option comes with serious costs.

What it costs you:

• You owe federal and state income taxes on the full amount withdrawn.
• If you're under age 59½, you also pay a 10% early withdrawal penalty on top of income taxes. (This penalty does not apply if you left your job at age 55 or older.)
• You permanently lose the chance for that money to grow over time.

If you have an urgent need for cash and no other options, consider withdrawing only what you need — if your former employer's plan allows partial withdrawals — rather than taking the entire balance.

How to Choose the Right Option

There is no single right answer for everyone. The best choice depends on your personal situation, including:

• Fees: Compare what each plan or account charges.
• Investment options: Look at what's available in each account.
• Plan rules: Each employer plan has its own rules about withdrawals, rollovers, and distributions.
• Your age and timeline: RMD rules and penalty-free withdrawal ages differ depending on which option you choose.

If you're unsure, speaking with a financial professional can help you avoid costly mistakes. Always confirm details with the relevant plan administrator or financial institution before making a decision, as rules and limits can change.