Updated May 29, 2023

Should You Consolidate Your 401Ks?

Your 401(k) may be subject to taxes or penalties when you get a new job – if you don’t make the right moves. Learn about consolidating and rolling your 401(k) balance into a new 401(k) plan or IRA.

Written by Richard Barrington

Financial Expert

Edited by Kristin Marino

Managing Editor

slide-7

Considering your options, there are three ways you can avoid tax consequences when leaving an employer’s 401(k) plan: You can leave your balance in the prior employer’s plan (if permitted); you can roll it into your new employer’s 401(k) plan; or you can roll it into an IRA.

There is a strong argument to be made for rolling into the new employer’s 401(k) plan. This may allow you to consolidate your existing 401(k) balance with future contributions. That consolidation might allow you to take a coordinated approach to asset allocation, retirement planning, and investment-performance monitoring.

Learn more: 3 reasons why automatic 401(k) enrollment may not be enough for retirement saving

About Author

Richard Barrington

Richard Barrington has been a Senior Financial Analyst for MoneyRates. He has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications. Richard has over 30 years of experience in financial services. He has earned the Chartered Financial Analyst (CFA) designation from the Association of Investment Management and Research (now the “CFA Institute”).