How to Transfer 401(k) to a New Job

If you recently changed jobs, learn how to transfer 401(k) to the new job, and the pros and cons of moving old 401(k)s to a new retirement plan.

3 min read

Changing jobs after years of working for your employer can be an emotional time, and you may likely forget about your old 401(k) account. Unless you let the former employer continue managing your retirement savings, you must decide where to move your 401(k) within 60 days. Usually, you can let your former employer continue managing your 401(k) account if you have at least $5,000.

If you decide to transfer 401(k) to your new employer’s 401(k), you must first contact the new plan sponsor to discuss the transfer. If the new employer accepts 401(k) rollovers from other employers, you will be required to fill forms for the transfer, detailing your personal information and the old 401(k) plan details. Once approved, you should provide the new 401(k) account details to the old plan sponsor to initiate the transfer. You can opt to have the former employer transfer the funds directly to the new employer’s 401(k) or choose to receive a check, which you must deposit to the new 401(k) plan in 60 days.

Why You Need to Transfer 401(k) to New Job

Since you will no longer make contributions to the former employer’s 401(k) plan, you should consider moving the retirement money to the new employer.

Here are reasons why you should rollover your 401(k) to the new employer’s retirement plan:

Avoid hidden fees

When you open a 401(k) account, there are certain periodic fees that are charged to your 401(k) account. Examples of 401(k) fees may include administrative fees, maintenance fees, and recordkeeping fees. These fees are expressed as a percentage, and they can cost you as high as 3.5% of your retirement savings every year. These fees rob you of the compound interest that you would have earned on the interest earnings. Rolling over the 401(k) helps consolidate the retirement assets, and lower the fees charged to manage your money.

Hectic to manage multiple accounts

As you move up the career ladder, it becomes hectic to manage the multiple 401(k)s left with former employers, and over time, you will likely forget about some of your most precious retirement assets.

If you would like to trace your lost 401(k)s, use to find lost 401(k) accounts and transfer them to an IRA or your new employer’s retirement plan. Consolidating all your old 401(k)s accounts helps ensure that the money is properly managed.

Decide where to invest

If your new employer offers a diverse selection of stocks and bonds with potentially higher returns, you are better off transferring the 401(k) to the new retirement plan. When you leave the 401(k) with the former employer, your investments will be limited to the employer’s selected investments. The new employer’s 401(k) may also offer a wider choice of investment options that align with your financial goals.

How to Rollover to 401(k)

If you decide to move your old 401(k) to the new employer’s 401(k) plan, you should follow these steps:

Contact new plan sponsor

The first step is to talk to the new plan sponsor or human resources manager to know what new employees require when enrolling in the retirement plan. Since not all employers accept old 401(k) transfers, you should ask the plan sponsor if the transfer option is available to new employees. If the new employer accepts 401(k) transfers, you will be required to fill transfer forms to initiate the transfer.

Fill Paperwork

The new plan sponsor will require the employee to provide their personal information i.e. name, mailing address, account number, social security number, date of birth, etc. You must also provide information about the old 401(k) plan such as the total amount of retirement savings, investment selections, type of contribution, etc. Once the paperwork is provided, it is returned to the plan sponsor.

Contact Former Plan Sponsor

Once the new plan sponsor approves the transfer, you should provide 401(k) transfer instructions to the old plan sponsor for review and subsequent approval. You should also provide the new 401(k) account details and mailing address where the funds will be transferred.  

Funds transfer

Once both plan sponsors approve the 401(k) funds transfer, the old plan sponsor will initiate the transfer. You can choose to move the 401(k) money through either a direct rollover or an indirect rollover. A direct rollover involves transferring the retirement savings directly from the old plan to the new plan through an electronic transfer. This type of rollover transfers the entire balance without incurring income taxes and penalties.

An alternative to the direct rollover is an indirect rollover, where the old plan sponsor sends a check to the account holder. The check must be deposited in the new 401(k) account within 60 days. In this case, the former employer withholds 20% of the funds for taxes, and you must deposit the entire amount (including the withheld amount) within 60 days.

Rollover the Money into an IRA

If you moved to a higher-paying job, you should consider a rollover IRA to get greater control over your investments. A rollover IRA allows you to combine all your old 401(k)s so that you have a single location for your retirement money.

Unlike a 401(k) where you are the participant, an IRA gives you full ownership of your retirement savings, and you can make decisions on your portfolio composition, and how much to invest in each type of security. You can also choose to convert your IRA account into a Roth IRA account if you think that your retirement income will be higher than your current income.

Pros of Transferring 401(k) to New Job

There are various benefits of switching 401(k) to a new employer. Here are some of the benefits of transferring your 401(k) to the new employer’s qualified retirement plan:

Ease of management

If you have changed jobs several times over the years, you might have a 401(k) graveyard. It may be difficult to keep track of each 401(k) account, and you will likely forget the passwords and account details. Transferring all the old 401(k)s into a single location makes it easy to manage your retirement money.

Streamline your investments

Once you have left your job, you will no longer have the privilege of making decisions regarding your 401(k)'s investment options. Rather, the plan administrator will make key decisions without your involvement. By merging your old 401(k) with the new 401(k) plan, you have a large pool of funds to create a well-diversified portfolio.

Access financial services

The new plan sponsor may offer additional financial services to help you achieve your financial goals. For example, the plan sponsor may offer free financial consultations to new employees to help align their investment with their overall financial goals.

Roth option

The new employer may offer employees a choice between a traditional IRA and Roth IRA. If you meet the requirements of a Roth 401(k), you can make post-tax contributions to allow your money to grow tax-free, and take a distribution in retirement without paying taxes. You can rollover the 401(k) to a Roth 401(k) plan if you feel that your income in retirement will push you into a higher tax bracket.

Cons of Transferring 401(k) to New Job

Limited investment options

Transferring your 401(k) to the new employer's retirement plan may not be the best option if the new plan limits you to fewer investment options. You may not achieve the desired asset allocation, and this may limit your ability to achieve the desired financial goals.


The processing of transferring a 401(k) to the new employer’s retirement plan can take several months, especially if you have to wait until a new employee enrollment window is open. The process may also take longer as the new plan sponsor vets your old 401(k)'s qualified status and funds eligible for transfer.