Life decisions

I’ve worked hard and come to a point in time where I have to make the decision to leave the job I’ve been at for 25 years and start focusing on my health and family. Question being I have a 401k with my company and don’t know what the next step could be in continuing retirement investing while after leaving with 401. *note 401 not where it need to be for retirement. Looking for advise ty


I have left several jobs and had 401k at each. My original job out of college, I kept the Simple IRA account and have not added to it. I’ve adjusted the holdings and through that, increased the value. I kept it as I really like the fund I’m in and if I exit the fund, I can’t buy back in. It is a small account, but I have others and it helps me diversify.

Two jobs back I rolled over my 401k and then added new funds at my new job (at the time). This account grew nicely. When I left that job, I once again left the account alone. I will not contribute any more to the account, but it will continue to grow.

At my current job, they (once again) use a different company for their 401k and I opened a fresh 401k. (so that means three total accounts for retirement).

I like it this way as:

  1. Not all my funds are in one place. (My grandmother lost 25K in 1987 when a company managing her funds failed)

  2. I prefer the website dashboards of two of my three accounts. If I switch jobs again, I might end up back with a 401k at one of those companies and it will be easier to consolidate them.

In today’s world, have positions longer than 5 years is getting tougher. (layoffs, buy outs, down sizing, etc.)


Investopedia is actually a pretty good source for such questions to provide you with the basic overview –…u-leave-your-job.asp and…-traditional-ira.asp

You say that you’d like to continue to invest in the account even after separating from your employer - but does that mean continue to invest in the specific account? Or - just continue to invest in an IRA?

Most definitely read your plan rules carefully - but generally speaking, if your existing 401k balance is 5K or more (blah, blah vesting rules especially), you don’t actually have to do anything. The account remains yours. You should be able to continue to reallocate investments within the terms of the plan, etc. You simply cannot invest additional funds to it.

Whether you should rollover or not is not necessarily a simple question. Again - read the plan rules carefully, but you definitely want to make sure you understand all the vesting criteria and also, consider how ‘good’ your current/soon-to-be-old 401k options are (i.e., does your plan a nice mix of good funds available… like simple broad market ETFs?).

So, so, so many exacting details matter - but it sounds like you won’t be moving from one employer with an employer-sponsored 401k to a new employer with a different 401k plan? I.e., you want to keep investing for retirement but won’t have an ESP vehicle (maybe you’ll do contract work, gig work, etc)?

If so - I wouldn’t be in a big rush to do anything with my existing 401k. Instead - spin up your own IRA. It will only really matter in year 1 (you’ll have to do your own math on contribution limits) and later - if you don’t ever rollover - at distribution time (i.e., retirement).

Yeah, generally speaking - it’s better to do the work for the rollover… but that’s very much weighted towards the idea of one ESP 401k to another ESP 401k. If you’re going from an ESP 401k to something self-directed? I think it gets a lot more individual-specific and not quite as automatic.

The key thing to remember with a 401k - you’ve got unpaid taxes, not to mention the 10% penalty should you take a distribution early - and you’re best off leaving it be until you’ve got all the ducks in a row to do a tax/penalty-free transfer. Your clock almost certainly doesn’t start until you start it… so - assuming your plan doesn’t have weird provisions? Just stay under 20.5k for 2022 in total contributions and open a Roth IRA that you fund with after-tax contributions for now. Might make sense to eventually consult an adviser or CPA to merge before retirement, but I wouldn’t be a big hurry to do so. The only provisos that might light a fire under my decision? If you are close (i.e. <2-3 years or so) to when I might want to start drawing from these accounts or, if your soon-to-be blocked 401k sucks (bad choices of investments, etc).


Can’t you just roll it over into an IRA and continue investing in it that way? I guess that was pretty much zonks advice too now that I read through it - and I agree Investopedia is a great resource for questions like this.


Follow zonk1984"s advice, it will benefit you in the long run. Also, click on the links provided to you from zonk1984, as Investopedia is the best source of free information.

Should you have other questions, later on, continue with Investopedia by using their search bar, such as, How to do a rollover conversion, transfer between accounts, transfer to an online brokerage, penalties, taxes, withdrawing from an existing account(s), etc.

Good Luck.


If you do contract or gig work, you could start your own company and open an individual 401k. You and your company can contribute/match. You should be able to rollover your existing/previous 401k.


All great advice here!


@pretzal posted:

Can’t you just roll it over into an IRA and continue investing in it that way? I guess that was pretty much zonks advice too now that I read through it - and I agree Investopedia is a great resource for questions like this.

Yeah - I got too wordy. My main point - that I could have said with a lot less words :slight_smile: - is that sometimes, one might be wiser to stick with the existing plan and open up a new self-directed IRA upon separation.

Increasingly - thank you fintech and internet! - this is becoming less true… but - especially if one is moving to an SDIRA, sometimes you’ll end up paying a transfer fee if you want to just rollover to a NEW provider but with the same investments (and - you might be faced with ongoing fees to continue to invest in that new fund in your new account).

I.e., Let’s say your 401k is managed by Fidelity… and you’re happy with the funds you’re in… You open a self-directed IRA with Vanguard - more than likely, you’ll pay not just a premium upon rollover (we’re talking fractions of a point, but still) to keep that fund, but also likely pay an extra premium to continue to invest in it (again, fractions, but it all adds up!). One can usually mitigate by using the same 401k servicer as your new SDIRA provider, but another case where one should read the fine print.

The 60 day rule clock - you can only rollover IRAs once every 365 days and you’ve got 60 days to “safe harbor” the money; meaning, from start to finish, the money has to move from one qualifying account to another before any taxes or penalties apply - only starts when YOU start it.

I just wouldn’t necessarily be in a rush to start the clock, especially if I were rolling over into a self-directed IRA.


It’s simple it’s does not matter what you do. The value of your work is depending your passion and your honesty with your work. So it’s does not matter what you do or done in your life.