Leave It In Place

• When you sever ties with your employer, you may not have to sever ties with your 401(k). Some employers allow former workers to leave their plans with the same administrator. If you have this option and you like the performance, you may want to leave the 401(k) right where it is. Leaving the 401(k) with the current administrator preserves the tax shelter and helps keep your retirement on track. The downside is that you may no longer receive emails and other routine notifications about the 401(k) from your employer. That can make it more difficult to track performance and keep abreast of changes to the plan.
  
  

Rollover IRA

• Often the best option is to roll over your 401(k) into an IRA. Rolling the money directly into an IRA keeps the money safe from taxes and allows it to keep growing. To roll the money over, simply contact the company you want to use for the IRA and let them know you have a 401(k) to move. That company will get you all the paperwork you need and take care of moving the money directly from one account to the other.
  
  

Take the Money

• It can be tempting to simply cash in your 401(k), especially when you are unemployed and in need of ready cash. But taking money from your 401(k) too soon can cost you a lot of money. If you choose to cash in your 401(k), the administrator is required to withhold 20 percent of the proceeds to cover taxes. In addition you face a 10-percent tax penalty on the money you withdraw. That means up to 30 percent of your 401(k) could be gone, along with the hard work and sacrifice you endured to put that money aside in the first place.
  
  

New Job

• If you are actively looking for a new job, you might want to leave your 401(k) with the old employer at least until you secure new employment. After you get a new job, that employer may allow you to roll the money from the old 401(k) into the plan they offer. Not all employers offer this option, so you will need to check when you start your new job.
  
  

Age 59-1/2

• If you are at least age 59 1/2, you can withdraw the money in your 401(k) without paying a penalty. You must still pay ordinary income taxes on the amount you take out, but you are no longer subject to the 10-percent penalty and automatic withholding that younger workers face.