What happens to your 401(k) if you change jobs?

Changing jobs? Your 401(k) doesn’t move with you automatically. Here are your four options—plus how to roll over an old 401(k) without triggering taxes.

Starting a new job comes with a checklist—new badge, new benefits, new direct deposit. One thing that’s easy to overlook: the 401(k) you’re leaving behind. So what happens to your 401(k) when you change jobs? The short answer is nothing, until you make a move.

Your old balance doesn’t disappear, and it doesn’t automatically follow you to your next employer. It sits in your former plan, waiting for a decision, and that decision can affect both your taxes and your long-term savings.

Below, we’ll walk through exactly what happens on your last day, the four options you’ll choose from, and a step-by-step plan for moving your money without a surprise tax bill.

What happens to your 401(k) on your last day?

When you leave your job, you have options for your old 401(k), but before you decide, here’s what happens to your account.

Your contributions stop, but your balance stays put

Once your final paycheck clears, new contributions stop—both yours and any employer match. But your balance stays invested in the plan. You don’t lose it, and it keeps rising and falling with the market just as it did before.

Vesting: What’s actually yours

The money you contributed is yours from day one, and so is any money you have rolled in from a previous account. Employer contributions, like a match, may be subject to a vesting schedule, which is a timeline you have to stay employed in order to fully earn. Two common types:

1. Cliff vesting: You’re 0% vested until you hit a milestone, then 100% all at once. For example, you might get nothing for three years, then become fully vested on your three-year anniversary. Leave at two years and 11 months, and you could forfeit the entire match. Federal law caps cliff vesting at three years for these contributions.
2. Graded vesting: You earn ownership gradually. A common schedule vests 20% after year two, then another 20% each year, reaching 100% after six years. Federal law caps graded vesting at six years.

Check your plan’s vesting schedule before you give notice. If you’re close to a milestone, your departure date could be worth thousands of dollars.

How long before your old employer acts?

There’s usually no need to rush, but “no rush” doesn’t mean “forever.” Plans typically send paperwork explaining your options within a few weeks of your departure, and they may set deadlines for smaller balances. Read anything you receive instead of letting it pile up.

Small balances can be moved without your sign-off

If your vested balance is small, your former employer can move it out of the plan for you. This is called a force-out, and it must be enabled in your plan (you can check in the Summary Plan Description). Under current rules—raised up to $7,000 by the SECURE 2.0 Act—it generally works like this:

• Under $1,000: The plan can cash you out and mail a check, which can trigger taxes and start the 60-day rollover clock (more on that below).
• $1,000 to $5,000 (or up to $7,000 if opted for by plan): Provided your plan includes force-outs, you can roll your balance into an IRA in your name automatically, often into a low-yield default option you didn’t choose.
• Over $7,000: The plan generally has to leave your money where it is unless you choose to move it.

Some plans set a lower threshold (you may still see $5,000 or as low as $1,000), so read any notice carefully. The takeaway: small balances are exactly the ones people forget—and the ones most likely to be moved into an account you didn’t pick.

How do you decide what’s right for you?

The best move depends on your balance, your new plan, and how hands-on you want to be. Run through these questions:

1. How big is the balance? Very small balances can be forced out. Act before your old plan decides for you.
2. Do you want more investment choices? IRAs usually offer a wider range, but your 401(k) may offer cheaper investment options you'd lose access to.
3. How important is creditor protection? A 401(k) generally offers strong protection. If you hold employer stock in your 401(k), rolling it over could mean losing special tax treatment on those shares, which could be worth checking before you move it.
4. Do you have multiple old 401(k)s? Consolidating into one IRA or your current 401(k) can make it easier to track.

How to actually do a 401(k) rollover

Rolling over a 401(k) can be simple, but knowing the steps ahead of time can help avoid costly mistakes.

Direct vs. indirect rollover (and why indirect can be risky)

You have two types of rollovers to choose from:

1. Direct rollover (recommended): Your old plan sends the money straight to your new 401(k) or IRA—often as a check made out to the receiving account, not to you. No taxes are withheld, and there’s nothing for you to track.
2. Indirect rollover, or 60-day rollover (riskier): The plan sends the money to you personally, rather than making the check payable to your new 401(k), IRA, or its custodian. You generally have 60 days to deposit all or part of it into another eligible retirement account.

Indirect rollovers can be risky, because:

• They are generally subject to 20% mandatory federal income tax withholding. To roll over the full amount, you have to replace that 20% from your own pocket—otherwise it’s treated as a taxable distribution (and may face the 10% penalty if you’re under 59½).
• If you miss the 60-day deadline, the taxable portion of the distribution may become taxable.

Whenever possible, choose a direct rollover and skip these traps.

How to do a 401(k) rollover in 3 steps

1. Select your new account: Decide where the money is going—your new 401(k) or an IRA—and open that account if you don’t have one yet.
2. Complete rollover request for old 401(k): Contact your old plan’s administrator and request a direct rollover. There will be a paper or digital form to complete.
1. Provide the receiving account details: account number, mailing instructions, and how to make out the check.
2. Confirm whether any of your balances are Roth or pre-tax so they land in the right type of account.
3. Verify that your funds have arrived: Watch for the funds to arrive, then make sure they’re invested. Rollover money sometimes shows up as uninvested cash.

What is the timeline for a 401(k) rollover?

Most rollovers take about two to four weeks from request to funding, depending on the institutions. Some plans still mail paper checks, so build in a little buffer and keep an eye out for anything that needs your signature.

401(k) rollover mistakes to avoid

1. Forgetting the account exists. Old 401(k)s are easy to lose track of after a move or an email change. Write down where it is and set a reminder to deal with it.
2. Missing the 60-day window. With an indirect rollover, blowing the deadline can turn your retirement savings into a taxable event. A direct rollover avoids this entirely.
3. Assuming your new job “absorbs” your old balance. Auto-enrollment in your new 401(k) only affects new contributions. It never pulls in your old account—you have to start the rollover yourself.
4. Cashing out “just for now.” It can feel harmless, but the taxes, the potential 10% penalty, and the lost years of compounding make it often the most expensive option.

Why roll over with Betterment?

Betterment is built to make moving and managing your retirement money straightforward—whether you’re consolidating a few scattered accounts or rolling one into an IRA or 401(k).

You get low-cost, diversified portfolios, automated tax-smart tools, and support walking through a direct rollover to help you steer clear of the risks of an indirect rollover.

Ready to give your old 401(k) a new home? Roll over with Betterment today.