Your 401(k) When You Leave the Job: Leave It, Move It, Roll It, or Cash It — the Four Options Counted at 2026 Fees and Rules

You resigned in September, or you were let go in October; either way the money question lands in the same week as the last paycheck. It arrives as a form. The plan’s administrator sends a written notice of your distribution options — the law requires it — and the form is one page. The decision behind it is four vehicles, and the form does not price any of them. I spent twenty-two years on the desk that sent those forms. The pattern never changed: the form gets signed in the week people are least equipped to read it, because it looks like paperwork. It is not paperwork. The rollover is a decision, not a form.

Say the four options in one line each, then price them.

• Leave it. The money stays in the old employer’s plan, in the fee structure it already has.
• Move it. The money rolls into the new employer’s plan, into that plan’s fee menu and rules.
• Roll it. The money moves to an IRA, done directly trustee to trustee, or done indirectly with a 60-day window and 20% withheld.
• Cash it. The money comes out, and the tax comes with it, dated 2026.

The question the whole family of searches asks — do you have to roll your 401(k) over when you change jobs? — has a flat answer: no. Nothing happens to the money automatically. What happens is that the clock starts on a decision that does not expire, except in one case the plan document can act on for you: a small balance. The SECURE 2.0 Act raised the amount a plan may pay out without your consent from $5,000 to $7,000 (section 304, effective for plan years beginning after December 31, 2023), and that applies to both separations and missing participants. Under $7,000, a plan is allowed to cash you out; allowed, not required. Above it, the four options are yours, and each is priced below at dated 2026 rules. Where anything here meets your plan document, the plan document governs — that is not a hedge, it is how these plans are written.

Option 1 — Leave It: the Fee You Already Have

The vehicle is the plan you are in. Its function is unchanged by your resignation: tax-deferred growth, the same pre-tax money, taxed when it comes out. What leaving does not change is the plan’s cost, and the cost is the number this section is about. Not the market. The cost of the vehicle, not the cost of the market.

The dated benchmarks, from named sources. The BrightScope/ICI Defined Contribution Plan Profile, a study of 51,043 audited 401(k) plans, found the asset-weighted average expense ratio on domestic equity mutual funds held in 401(k)s in 2022 ran from 0.43% in plans under $1 million in assets to 0.31% in plans over $500 million; across the whole sample, 0.34% (the 2022 profile, cited in the ICI’s July 2025 fee study, The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2024). For 2024 the same ICI study reports 401(k) participants who invested in equity mutual funds paid an average expense ratio of 0.26%. On top of fund fees, recordkeeping: the Plan Sponsor Council of America’s 2024 survey, quoted in that study, found 50.6% of 401(k) plans paid recordkeeping fees from plan assets — that is, out of participant accounts. Against the plan, the IRA: the big US total-market and S&P 500 index funds carry fact-sheet expense ratios of 0.03% in 2026, the figures this site’s own 2026 wrapper-cost table counts.

Now the count, on one dated balance. $100,000 left in a small plan charging 0.43% on the money it holds, against the same $100,000 in an IRA paying 0.03%, both invested identically, both growing 6% a year before the fee — an assumption, stated so you can change it — over twenty years. At 0.43%, the balance ends at $295,672. At 0.03%, it ends at $318,903. The fee, not the market, is $23,231 of the ending number. At the 0.34% all-sample average the gap is $18,149; at 0.31% versus 0.03%, twenty years of a $310-a-year difference on the first $100,000, compounding. One year of 0.43% on $100,000 is $430, and that is the year-one printout of a line most people never read on their participant fee disclosure.

The averages are averages, and the honest sentence about a benchmark is that it is not your plan. Two plans a block apart can run 0.1% and 1.0% on identical money. The one number worth looking up today is on your participant fee disclosure, the document ERISA rules require every plan to hand you: the administration and recordkeeping charge, stated as a percent of assets or a flat dollar amount. Compare that against 0.03%, and you have your real version of the count above, not the benchmark’s.

What leaving preserves is worth as much as what it costs. The plan is the one vehicle here with an employer inside it, which means the loan provisions — if the plan has them — stay available, and the exception in the section called “The things nobody puts on the option list” stays alive. It also keeps the strongest creditor protection of any of the four options, which is that section’s other item.

Option 2 — Move It: One Account, Someone Else’s Menu

The vehicle is the new employer’s plan, and the move is a rollover — the same tax treatment as any direct rollover: the money is not taxed and not a contribution, it simply changes vehicles. Done, it buys two things. One account instead of two, which is worth something to anyone who has ever tried to rebalance across statements. And a plan-size lottery: if the old plan was small and the new employer is large, the same benchmark table that showed 0.43% at the small end shows 0.31% at the large end, and the fund menu you did not choose but inherit gets cheaper.

What changes is that the new plan’s menu and rules become yours wholesale. Whether the new plan accepts rollover money in is a plan term, not a right: plans are permitted to take in rollovers, not required to, and the new plan’s summary plan description is the document that says yes or no — check it before the resignation letter is final. Where rollovers are accepted, the mechanics are unusually kind: the once-a-year rollover limit is an IRA-to-IRA rule; a plan-to-IRA or plan-to-plan rollover carries no waiting period (IRS Publication 590-A). The 20% withholding does not enter a direct rollover at all — it only applies to money paid to you, which is the next section.

One cost of moving sits inside the rule of 55 and almost nobody spots it before it is signed. The penalty exception is written against separation from service with the employer whose plan holds the money. Roll into the new employer’s plan and you have separated from nobody — so the money that had an open, penalty-free door the moment you left the old job now has a door that stays shut until you leave the new one, or until 59½. The new plan reset your separation. For most readers that door stays closed for years; for someone who left at 56 and rolled forward at 57, it is the whole difference between money you can reach and money you cannot.

Option 3 — Roll It to an IRA: Direct, and Indirect Priced

The vehicle is an IRA, and the IRA’s function is the plan’s function — tax-deferred — plus two things a plan does not give you by default: the full menu of the market at IRA prices, starting at 0.03% for the indexed versions, and the widest choice of where the account lives. The cost of the IRA is not a fee; it is the discipline of picking, and the fee question this time is one you answer by buying cheap, which is the wrapper-and-fund arithmetic this site’s 2026 cost table already counts. What goes inside the vehicle is that table’s question, not this article’s.

The rollover itself comes in two forms and one of them is priced.

The direct rollover costs nothing to do: you instruct the old plan to transfer the money to the IRA custodian, and the money never touches your hands. Mandatory withholding does not apply to a direct rollover (IRS Publication 575; Tax Topic 413). This is the only form of the move that does not require you to find money you do not have.

The indirect rollover — a check made out to you — is priced, and the price is a percentage. Any taxable eligible rollover distribution paid to you from an employer plan is subject to mandatory federal income tax withholding, generally at 20%, even if you intend to roll it all over later (Topic 413). Count it on $100,000. The check that arrives is $80,000. You have sixty days from the day you receive it to roll over the full $100,000 — not the $80,000 — and to do that you have to find $20,000 from other money, your own, within the window. Roll the full amount and the withheld $20,000 comes back when you file, in April, after you have financed the gap yourself. Do not roll the full amount and the shortfall is ordinary income in the year of the distribution, and if you are under 59½ with no exception, the 10% additional tax rides on top of the income tax: the $20,000 left out at a 22% marginal rate costs $4,400 of tax and $2,000 of additional tax, $6,400 gone from the $20,000 you were chasing, and the remaining $13,600 is yours to wait for.

The withholding rate can also be too low for your situation — Topic 413 says the default may under-withhold and offers Form W-4R to elect a higher rate, which is the IRS telling you the indirect route’s real cost is set by the April bill, not by the check that arrives. The sixty-day window has waiver procedures (self-certification under Revenue Procedures 2016-47 and 2020-46, per Topic 413), and a waiver is a filing, not a plan. Even a rollover that is not taxable is reportable on the return. There is a narrow good case for the indirect form — the money paid to you can be completed to an IRA from your own funds, and a plan loan offset at separation gets until the tax filing deadline of the offset year rather than sixty days — and it is narrow enough that the checklist at the end of this article starts with “direct.”

One rollover question has its own clock, and it is already counted on this site. Rolling pre-tax money into a Roth IRA is a conversion, the five-year clock in a receiving Roth starts in the rollover year, and a pro-rata rule waits behind any traditional IRA balance you already hold. Those 2026 mechanics belong to the 401(k) vs Roth IRA article; read it before signing anything with the word Roth in it, because the form will not.

Option 4 — Cash It Out, Counted Before You Reach

The vehicle here is the checking account, and its function is: the money stops being tax-deferred. All of it, this year. The number comes first, because this option is the one people reach for in the week the paycheck stops.

Dated 2026 arithmetic. A single filer earning $60,000, 54 years old: under 59½, so the additional tax this count carries applies unless one of its exceptions fits. The standard deduction is $16,100 for 2026 (IRS Rev. Proc. 2025-32), so taxable income is $43,900 — inside the 12% bracket. Now the $50,000 pre-tax balance is cashed out. It lands on top of the salary: taxable income $93,900, which crosses into the 22% bracket of the same 2026 rate schedule. Federal income tax before the cash-out: $5,020. After: $15,370. The cash-out’s tax is $10,350. And because the distribution is taxable and not rolled and the account is a qualified plan, the 10% additional tax on early distributions adds $5,000 unless an exception applies (Tax Topic 558). The count: $15,350 of $50,000, 30.7% of the money, at 2026 rates, to a single filer at $60,000 of salary. In hand at separation, after the mandatory 20% withholding, the check was $40,000; the rest of the bill arrives in April.

This is not the worst option at the wrong moment. It is the most expensive option at almost every moment, and it is the one the option list on the form does not price. If the money is needed — an eviction, a medical bill, a bridge to the next paycheck — the math may still say cash out part of it; that is a household decision, not a vehicle one. What this section exists to make sure of is that it is a decision made knowing the number: $15,350, dated 2026, and the number moves with your bracket, not with your feelings. The same page that adds this tax also lists the exceptions to it — and one of those exceptions is about to decide the other three options.

The Things Nobody Puts on the Option List

Three factors sit outside the four lines on the form, and each can outrank every fee on this page.

The rule of 55. The 10% additional tax on early distributions has an exception for distributions made after you separate from service with your employer, in or after the year you reach age 55 (Publication 575). Not the year you turn 55.0 — the year you reach 55, and the separation must be from the employer whose plan holds the money. Two consequences follow, and they are the only irreversible items in this article. First, the exception is a plan rule: it applies to distributions from a qualified plan other than an IRA (Topic 558). Roll the money to an IRA and the exception does not travel with it; the IRA has its own exception list, and separation-at-55 is not on it. Leaving at 56 can therefore mean penalty-free access to $40,000 the same year — $4,000 of additional tax not owed — while the same $40,000 sitting in an IRA, in the hands of the same 57-year-old, costs the $4,000. Second, the exception dies at the next signature: a new-plan rollover resets the separation (Option 2), and so does a merge into any employer whose plan you have not separated from. The rule of 55 is the one factor you cannot buy back with a fee.

Creditor protection, by vehicle. Not legal advice — a dated fact about the two main vehicles, because readers choose blind on it. An ERISA-qualified plan is protected in bankruptcy without a dollar limit; the protection rides on the ERISA anti-alienation rules that state law cannot reach. The IRA does not ride that structure in bankruptcy. Its protection is a capped exemption: as adjusted on April 1, 2025, the aggregate cap on IRAs under 11 U.S.C. 522(n) is $1,711,975 per debtor in cases electing the federal exemptions (Federal Register 90 FR 8941). Outside bankruptcy, protection depends on state law and varies. For a household with a real liability exposure and a balance over the cap, the vehicle question and the lawsuit question become the same question; that is the moment to pay a professional, and this sentence is the boundary of what an article about vehicles can say.

The Roth five-year clock. If any part of the money is or becomes Roth, a five-year period governs whether earnings come out tax-free, and in a receiving Roth IRA the clock starts from the first year a contribution was made to that IRA. This site counts it, with the pro-rata rule, in the 401(k) vs Roth IRA article — it is a decision, not a form, and the form does not choose the clock.

The Four Options, Counted

The One Question That Decides It

Every factor in the table except one can be priced in an afternoon: fees are on the disclosure, withholding is avoidable by choosing direct, taxes are the same at arrival whichever parked vehicle you pick. The one that cannot be bought back is access. So the one question that decides the four options is this: do you need this money before you are 59½ — reachable without the additional tax?

If the honest answer is yes and you are 55 or older this year, the old plan is the only vehicle that was ever going to answer that question, and the other three options each cost exactly one exception, the rule of 55. If the answer is no, the decision collapses into the ten-minute version: read the fee disclosure, ask the new plan whether it takes rollovers, and move the money direct to wherever the cheaper vehicle is. If the answer is “I need some of it now,” that is Option 4, and the $15,350 was counted above so the household chooses it with its eyes open.

The checklist, in the order I would fill it out at the desk:

• Open the participant fee disclosure. Write down the administration/recordkeeping number — that is the fee against everything else on the page.
• Check the age condition: do you reach 55 this calendar year, and is this the employer you are separating from? If yes, the old plan keeps a door the others close.
• Ask the new plan one question: do you accept incoming rollovers, and what does the fee schedule say?
• Whatever you choose: in writing, direct — never a check made out to you.
• If the balance is under $7,000, find out what the plan does with small balances before it answers for you.
• If there is real liability exposure and a big balance, the vehicle choice and the asset-protection question are one question; take them together to someone who can answer both.
• If anything in the move is or becomes Roth, read the Roth-clock and pro-rata section before signing.

The vehicle is moved, the form is filed, and the one question is answered — which is where this article ends and the next two begin. What to hold inside the vehicle is priced in the 2026 wrapper-cost table; how much the vehicle has to hold to pay for the retirement is the retirement number; and the 2026 contribution limits the rollover leaves untouched — a rollover is not a contribution — sit in the dated limits article, along with the catch-up rules the rule of 55 does not change. The rollover is a decision, not a form. Now go make the decision, and let the form catch up.