What should you do with your 401(k) when you change jobs?
401(k) Rollovers, what are they?
A 401(k) rollover is when money is taken out of an existing 401(k) and moved to one of the following: (1) another 401(k), (2) a Traditional IRA, or (3) a Roth IRA.
A common reason to roll over a 401(k) is changing jobs.
One option is a direct rollover to a Traditional IRA, which offers greater control over investments, account consolidation, and a wider range of investment options. IRAs are a popular destination for these funds: as of mid-2024, 44% of US households owned an IRA, and 59% of Traditional IRA–owning households reported that their accounts contained rollovers from employer-sponsored retirement plans.
Another alternative is a direct rollover from your previous 401(k) plan to your new employer's 401(k) plan. However, there are reasons you might not want to do this: (1) your current plan has lower fees, (2) it's more convenient, since you don't have to do anything, and (3) you prefer your current plan's investment options. A downside of leaving funds in a former employer's plan is that you can end up with multiple 401(k)s across multiple brokers.
Rollover your 401(k) to your new employer's plan?
Another option when changing jobs is a direct rollover from your old 401(k) into your new employer's 401(k) plan. As with an IRA rollover, the funds move straight from your former plan administrator to your new one, so the money never passes through your hands and no taxes are withheld.
The main appeal is simplicity. Keeping everything in a 401(k) means one account to track, contributions and any employer match flowing into the same place, and the familiar structure of an employer-sponsored plan. Workplace plans also carry strong federal creditor protections, and many offer institutional-class funds with lower fees than individual investors can typically access on their own.
Employer plans remain the backbone of US retirement saving. As of late 2025, Americans held $10.1 trillion in employer-sponsored 401(k) plans, and nearly 9 in 10 IRA-owning households also reported having employer-sponsored retirement plan accumulations or defined benefit coverage, showing how often the two work side by side.
Rolling into a new employer's plan isn't always the best fit, though. Your new plan may have a narrower menu of investment options or higher fees than an IRA, and you'll be limited to whatever funds the plan offers. It's worth comparing costs and choices before consolidating, but for many people the convenience of a single workplace account is worth it.
Rollover your 401(k) to a Traditional IRA?
One option when leaving a job is a direct rollover from your 401(k) into a Traditional IRA. A direct rollover moves the funds straight from your plan administrator to your IRA provider, so the money never passes through your hands and no taxes are withheld.
The main appeal is flexibility. A Traditional IRA typically offers greater control over your investments, the ability to consolidate accounts from multiple former employers, and a far wider range of investment options than most employer 401(k) plans, which are usually limited to a preset menu of funds.
IRAs are an increasingly common home for retirement savings. As of mid-2024, 44% of US households owned an IRA, up from 34% a decade earlier. Rollovers are the primary driver of this growth: 59% of Traditional IRA–owning households reported that their accounts contained money rolled over from an employer-sponsored retirement plan, and among those, the large majority rolled over their entire balance.
A rollover to a Traditional IRA isn't always the best choice, though. Your current 401(k) may have lower fees, offer institutional-class funds unavailable to individual investors, or provide stronger creditor protection under federal law. It's worth comparing costs and features before moving any money.
What is an IRA?
An IRA (Individual Retirement Account) is a personal savings account you open on your own to invest for retirement, with tax advantages to help your money grow. There are two main types: a Traditional IRA, where you typically contribute pre-tax money and pay taxes when you withdraw in retirement, and a Roth IRA, where you contribute after-tax money and qualified withdrawals are tax-free. The IRS sets annual limits on how much you can contribute.
What's the difference between a 401k and an IRA?
A 401(k) is a retirement account you get through your employer which often matches part of what you put in. An IRA (Individual Retirement Account) is one you open on your own. Both grow tax-advantaged, but they have different contribution limits and rules.
What's the difference between a Traditional and Roth IRA?
The main difference is when you pay taxes. With a Traditional IRA, you usually contribute pre-tax money and get a tax break now, but you pay taxes when you withdraw in retirement. With a Roth IRA, you contribute money you've already paid taxes on, so qualified withdrawals in retirement are tax-free. A rough rule of thumb: choose Traditional if you expect to be in a lower tax bracket in retirement, and Roth if you expect to be in the same or higher bracket. Roth IRAs also have income limits that can restrict who is eligible to contribute.
Deeper dive on IRAs
The US Congress created tax incentives to encourage individuals to save for retirement: employers provide 401(k) plans, and individuals have access to Individual Retirement Accounts (IRAs). The advantage of IRAs is that they are tax-advantaged savings accounts not tied to an employer. IRAs are funded by contributions and rollovers.
There are two types of IRAs defined by their US income tax treatment: (1) Traditional IRAs, and (2) Roth IRAs. Contributions to a Traditional IRA are tax deductible for certain households, and taxation on contributions and earnings is deferred until withdrawal. Roth IRAs have non-deductible contributions and receive withdrawals tax-free in retirement.
IRAs have different withdrawal rules from 401(k)s. Individuals can withdraw funds from an IRA at any time, while 401(k)s can typically only be withdrawn if the plan allows it and for a specified reason such as hardship. Pre-retirement withdrawals from IRAs and 401(k)s can incur tax penalties unless an exception applies.
What are other people doing in this situation?
Ownership of retirement accounts shifts in a telling way as people age. Among households in their 40s, 401(k)-type accounts are far more common than IRAs: about 55% of households aged 45–54 hold a workplace account, versus 28% with an IRA. But that gap narrows through the 50s and flips entirely by retirement age. Among households 65 and older, only 14.5% still hold a 401(k)-type account, while 40.2% own an IRA.
- Owns a 401(k)-type account
- Owns an IRA
| Age of household | Owns a 401(k)-type account | Owns an IRA |
|---|---|---|
| 35–44 | 51.1% | 28.0% |
| 45–54 | 54.8% | 27.9% |
| 55–64 | 42.8% | 32.4% |
| 65+ | 14.5% | 40.2% |
That crossover is the rollover decision playing out across millions of households. As people leave their jobs and retire, money steadily migrates out of employer 401(k)s and into IRAs. The Congressional Research Service points to exactly this, noting that 401(k)-type ownership peaks in the 45–54 age group and then declines, likely because households are rolling their savings into IRAs.
In other words, choosing what to do with an old 401(k) isn't an unusual situation. It's one of the most common financial moves people make as they approach retirement, and rolling into an IRA is where most of that money ends up.
How can Nanotoa help?
Most people don't end their careers with a single retirement account. The average worker born between 1957 and 1964 held more than 12 jobs before age 54, and each one may have come with its own 401(k). It's no surprise that an estimated 29 million 401(k) accounts have been left behind or forgotten, holding well over $1 trillion in assets. When your money is scattered across old employers, brokers, and IRAs, it's hard to know what you actually have.
Nanotoa fixes that. We automatically pull all of your accounts: 401(k)s, IRAs, brokerage, savings, even your home and mortgage, into a single asset and liability ledger. Instead of logging into five different sites, you see your entire financial picture in one place.
Then we put that picture to work. Nanotoa projects what your income could look like if you retire at 62, 65, or 67, so you can see the trade-offs of each choice before you make them. That matters, because most people are flying blind. In one survey, 70% of women and 56% of men agreed it's difficult to know how their savings will translate into monthly retirement income.
Whether you're deciding what to do with an old 401(k) or just trying to understand if you're on track, Nanotoa turns a pile of disconnected accounts into one clear answer: here's what you have, and here's what it means for retirement.
401(k) Rollover Frequently Asked Questions
What is a 401(k) rollover?
A 401(k) rollover is the process of moving the money from a 401(k) account at a former employer into another retirement account, typically an IRA or your new employer's 401(k) plan. When done correctly, the money keeps its tax-advantaged status and you owe no taxes or penalties on the transfer.
What are my options when I leave a job with a 401(k)?
You generally have four options: roll the money into an IRA, roll it into your new employer's 401(k) plan (if allowed), leave it in your old employer's plan (if the balance is large enough), or cash it out. Cashing out usually triggers income taxes plus a 10% early withdrawal penalty if you're under 59½, so it's rarely the best choice.
What's the difference between a direct and indirect rollover?
In a direct rollover, the money moves straight from your old plan to the new account without you ever touching it. In an indirect rollover, the old plan sends a check to you, and you have 60 days to deposit it into the new account. Indirect rollovers are riskier: your old plan withholds 20% for taxes, and you must come up with that amount out-of-pocket to roll over the full balance. Direct rollovers are almost always the better choice.
Can I roll a Roth 401(k) into a Roth IRA?
Yes, and this is a direct, tax-free move. Your contributions and earnings transfer to the Roth IRA where they continue to grow tax-free. One bonus: rolling to a Roth IRA eliminates the required minimum distributions that Roth 401(k)s used to require during the original owner's lifetime.
Can I roll a traditional 401(k) into a Roth IRA?
Yes, but this is called a Roth conversion and it's a taxable event. The amount you convert gets added to your income for the year and taxed at your ordinary income rate. It can be a good move if you expect to be in a higher tax bracket later or want tax-free growth, but the upfront tax bill can be significant.
How long does a rollover take?
Most rollovers complete in 2 to 4 weeks, though it can take longer depending on your old plan's processing times. The process typically involves opening the receiving account, requesting the distribution from your old plan, waiting for the check or wire transfer, and confirming the funds have been invested in the new account.
Is there a deadline to complete a rollover?
Yes, if you do an indirect rollover, you have 60 days from receiving the funds to deposit them into the new account. Miss the deadline and the entire amount becomes a taxable distribution, plus a 10% penalty if you're under 59½. Direct rollovers have no such deadline since you never receive the money personally.
What if I have multiple old 401(k)s?
You can roll each one into the same IRA, consolidating your retirement savings into a single account. This makes it easier to manage your investments, track your balance, and plan withdrawals. There's no limit on how many rollovers you can do as long as they're direct rollovers.
What if I have an outstanding loan from my 401(k)?
When you leave your job, any outstanding 401(k) loan typically becomes due. If you can't repay it, the unpaid balance is treated as a taxable distribution and may trigger a 10% penalty if you're under 59½. You generally have until the tax filing deadline (including extensions) of the year you left to repay the loan or roll the equivalent amount into an IRA to avoid the tax hit.
What is a 401(k)?
A 401(k) is a retirement savings account offered through your employer that lets you contribute a portion of your paycheck before taxes are taken out. Many employers match part of what you contribute, which is essentially free money toward your retirement. Your contributions grow tax-deferred, meaning you don't pay taxes on the money or its earnings until you withdraw it in retirement. Like IRAs, 401(k)s have annual contribution limits set by the IRS, and withdrawing early (before age 59½) usually triggers taxes and a penalty.
How did the 401k get its name?
The 401(k) plan is defined in subsection 401(k) of the Internal Revenue Code (IRC), which is codified in statute as Title 26 of the United States Code.
What is an IRA?
An IRA (Individual Retirement Account) is a personal savings account you open on your own to invest for retirement, with tax advantages to help your money grow. There are two main types: a Traditional IRA, where you typically contribute pre-tax money and pay taxes when you withdraw in retirement, and a Roth IRA, where you contribute after-tax money and qualified withdrawals are tax-free. The IRS sets annual limits on how much you can contribute.
What's the difference between a 401k and an IRA?
A 401(k) is a retirement account you get through your employer which often matches part of what you put in. An IRA (Individual Retirement Account) is one you open on your own. Both grow tax-advantaged, but they have different contribution limits and rules.
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