Do you know exactly how much you're paying in fees on the 401k you left behind when you changed jobs?

Most people don't. And that's not a knock on you, it's just how these things go. You change jobs, focus on the next chapter, and that old retirement account quietly sits in the background for years.

Here's the thing though, an old 401k isn't a "set it and forget it" situation. It's still one of your largest financial assets, and the decisions you make about it today could impact your retirement for decades.

So if you've got an old employer retirement plan sitting out there, here's what I'd be looking at.

First, What Are Your Options?

When you leave an employer, you generally have four choices for that 401k:

1. Leave it where it is. Simple, but not always smart.
2. Roll it into your new employer's plan (if they allow it and the plan is decent).
3. Roll it into an IRA. Usually gives you more control and more investment options.
4. Cash it out. Almost never the right move.

None of these are automatically "right." The best option depends on your investment choices, fees, tax situation, retirement timeline, and overall financial plan.

Let's look at the factors that should drive the decision.

Start With the Fees

One of the first things I'd want to know is what you're actually paying.

Some employer plans are excellent and offer very low costs. Others may charge administrative fees to former employees or have investment expenses that are higher than comparable alternatives.

Even what seems like a small difference can have a significant long-term impact.

For example, paying 1% more in annual fees over 20 years can reduce your retirement savings by tens of thousands of dollars, depending on your account balance and investment performance.

Action item: Pull your last quarterly statement and actually look for the expense ratio and any account maintenance fees. If you can't find them, call the plan administrator and ask directly.

Investment Options Increase Once You Leave

Most 401k plans offer a limited menu of investments selected by the employer.

Rolling the account into an IRA opens the door to a much broader range of investments, including ETFs, mutual funds, individual stocks, bonds, CDs, and other strategies that may better fit your retirement goals.

That flexibility becomes increasingly important as retirement approaches.

The investment strategy that made sense when you were 35 and focused on growth may not be the same strategy you need at 60, when protecting your savings and creating retirement income become higher priorities.

Consolidation Isn't Just About Convenience

If you've got three old 401(k)s scattered across three former employers, "out of sight, out of mind" is a real risk, and not just for you. It's a risk for whoever helps settle your estate someday, too. Consolidating into a single IRA makes it dramatically easier to:

• See your full picture and rebalance properly
• Manage required minimum distributions (RMDs) once you hit that age
• Coordinate Roth conversion strategies during lower-income years
• Simplify beneficiary planning
• Make life much easier for our family if something happens to you

Sometimes simplifying your finances is just as valuable as improving your investments.

Don't Overlook Company Stock (NUA Strategy)

If your old 401k includes employer stock, don't rush into a rollover.

There is a tax strategy called Net Unrealized Appreciation (NUA) that may allow certain company stock to receive long-term capital gains treatment instead of ordinary income tax on the appreciation.

Since long-term capital gains rates are often lower than ordinary income tax rates, this strategy can create meaningful tax savings for the right situation.

However, once employer stock is rolled into an IRA, that opportunity is generally gone.

If company stock is involved, it's worth slowing down and speaking to a professional to review your options before making a decision.

The Cash-Out Trap

I understand why cashing out can be tempting.

A large balance sitting in an old retirement account can look like an easy solution when you're between jobs or facing a major expense.

Unfortunately, it's usually one of the most expensive decisions you can make.

If you're under age 59½, cashing out typically means:

• Ordinary income tax on the full amount
• A 10% early withdrawal penalty on top of that
• Giving up years (or decades) of future tax-deferred growth

A $50,000 cash-out today could easily have been $150,000+ by retirement if left invested. That's a hard number to argue with.

The Bottom Line

An old 401k isn't just a leftover, it's a decision point. The right move depends on your fees, the investment options available, whether there's company stock involved, how many accounts you're juggling, and what your broader retirement income plan looks like.

If it's been a while since anyone looked at that account, that's exactly the kind of thing we walk through in a Retirement Architecture Review. No pressure, no obligation, just a clear picture of what that old account is actually doing for you (or against you).

Schedule a time to talk →

Frequently Asked Questions (FAQs)

Is rolling over a 401k into an IRA taxable?

No. A direct rollover from a 401k to a Traditional IRA is generally not a taxable event as long as the funds move directly between financial institutions. However, converting a Traditional 401k to a Roth IRA may create a taxable event. Always consult your tax advisor before making a rollover or conversion.

Can I roll my current 401k into an IRA while I'm still working?

It depends on your employer's retirement plan. In most cases, you cannot roll money out of your current employer's 401k while you're still employed. However, some plans allow what's called an in-service distribution, which lets eligible employees transfer some or all of their 401k balance to an IRA while continuing to work.

Many plans don't permit in-service distributions until you reach age 59½, while others may have different eligibility requirements or may not allow them at all. Because every plan is different, it's important to review your plan document or ask your HR department or plan administrator what options are available.

If you're eligible, rolling a portion of your 401k to an IRA may provide access to a broader range of investment options and additional planning strategies.

Can I combine multiple old 401k accounts into one IRA?

Yes. Many people choose to consolidate multiple retirement accounts into a single IRA. Doing so can make it easier to monitor your investments, rebalance your portfolio, manage Required Minimum Distributions (RMDs), and keep beneficiary information organized.

What happens if I cash out my old 401k?

If you're under age 59½, cashing out a Traditional 401k will generally result in ordinary income taxes on the distribution and may also trigger a 10% early withdrawal penalty unless an exception applies. In addition to the immediate tax consequences, you'll lose the opportunity for future tax-deferred growth, which can significantly reduce your retirement savings over time.

How do I know if my old 401k is charging high fees?

Start by reviewing your quarterly statement or requesting the plan's fee disclosure from the plan administrator. Look for investment expense ratios, administrative fees, and account maintenance charges. Even small differences in fees can have a meaningful impact on your retirement savings over the long term. If you're unsure how to evaluate the costs, a financial professional can help you compare your options.

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By Morgan Fisher, Iowa Retirement Benefits & Solutions

This article is provided for informational purposes only and should not be considered tax, legal, or investment advice. Always consult with your tax, legal, or financial professionals before making decisions regarding your specific situation.

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