The Forgotten 401(k): Stay, Move, or Roll

If you’ve recently left a job (or are about to retire), there’s a good chance you’ve got a 401(k) sitting with your old employer. If you’re like most people, it’s still sitting there because…well, life got busy. You meant to “get around to it,” but figuring out what to do with that account ranks right up there with cleaning out the garage. It nags at you, you know it’s important, but you’re not sure where to start.

Here’s the truth: doing nothing isn’t necessarily wrong. But doing nothing without understanding your options? That’s where people get tripped up. Let’s walk through what to consider because your retirement savings deserve more than being forgotten in some digital drawer.

When you leave a job, you generally have three paths:

  • Leave your 401(k) where it is. Some plans are excellent, with low costs and strong investment options (cough…all Bowline Financial institutional clients for example…cough cough). But the majority…not so much. If you leave it behind, make sure you’re comfortable with the fees, the funds, and the technology you’ll be relying on.
  • Move it into your new employer’s plan. If your new company offers a 401(k) and accepts rollovers, consolidating accounts can simplify your financial life. Plus, keeping money inside a 401(k) instead of an IRA may preserve your ability to make backdoor Roth IRA contributions down the road. (See July’s edition for “Those Who Need more Roth in Their Life”)
  • Roll it into an IRA (or Roth IRA). This option often gives you the broadest range of investments and creates more flexibility for tax planning in retirement. For example, rolling pre-tax assets into an IRA allows for Roth conversions later…something you can’t typically do inside a 401(k).

The best choice isn’t about “where are the fees lowest?”, it’s about the full picture. Consider:

  • Costs and investment quality. Every plan has fees. Some employer plans are competitive; others are expensive with limited fund menus. IRAs tend to open the door to a much wider universe of investments.
  • Taxes and contribution rules. A 401(k) allows higher contribution limits than an IRA, so if you still want to save aggressively, your employer plan may be the better vehicle. On the flip side, consolidating old accounts into an IRA may give you more control over when and how you pay taxes in retirement.
  • Consolidation and simplicity. Fewer accounts means fewer passwords, statements, and Required Minimum Distributions to track later in life. Most people underestimate how valuable that simplicity becomes. 
  • Flexibility in retirement. IRAs can provide more control over withdrawals, Roth conversions, and even beneficiary planning. 

People are often intimated to make a decision when it comes to finances. You don’t want to make the wrong move, and you don’t exactly have hours of free time to dig into IRS rollover rules or compare fee disclosures. So the account just sits there, like the laundry pile in the corner.

That’s where fiduciary advisors (like CERTIFIED FINANCIAL PLANNER™ professionals) come in. Our job isn’t to sell you a product or push you toward one option. It’s to evaluate your situation, weigh the trade-offs, and make sure your decision fits your bigger financial picture.

Every person’s circumstances are different. Your tax bracket, future savings goals, and whether you plan to make backdoor Roth contributions can all influence what’s best. There’s no one-size-fits-all answer, only the answer that’s right for you.

If you’ve got an old 401(k) and you’re thinking, “I know I should deal with this, but I don’t want to mess it up,” that’s exactly when a CFP® can help. Rely on us to weigh the rules, the opportunities, and the trade-offs so you can move forward with confidence.