401(k) Rollover Options — Compare IRA vs. Stay in Plan vs. New 401(k)
When you leave a job or retire, choosing what to do with your 401(k) can be confusing. Should you roll it to an IRA, stay in your current plan, move it to your new employer, or cash out entirely?
In this video and guide, we break down the pros, cons, fees, and tax considerations of each option — so you can make an informed, confident decision that fits your long-term plan.
Author: Tom Bowman, CFA CFP®
Last Edited: November 5, 2025
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Side-by-Side Comparison: Which Rollover Option Fits You Best?
| Criteria | Rollover to IRA | Stay in Old 401k | New Employer 401k | Cash-Out |
|---|---|---|---|---|
Investment Flexibility | Broad — ETFs, funds, direct indexing | Limited to plan lineup | Limited to plan lineup | None |
| Typical Fees | More transparent; advisory + custody | Plan admin + fund expenses | Plan admin + fund expenses | Income tax + penalties |
| Tax Implications | Tax-free if direct rollover; can support Roth conversions | Tax-deferred; plan rules vary | Tax-deferred; plan rules vary | Fully taxable, 10% penalty if under 59½ |
| RMD Rules | RMDs on pre-tax; none for Roth IRA | Plan rules apply; may delay if working | Plan rules apply | N/A |
| Simplicity | Consolidates accounts | Set-and-forget | Consolidates payroll deferrals | Simple now, costly later |
| Best Fit For | Want control, broader menu, or advisor help | Low-cost plan lineup | Prefer payroll integration | Need short-term liquidity (rarely ideal) |
💡 Key Takeaways
IRAs offer more flexibility and planning opportunities (like Roth conversions or tax-loss harvesting).
Staying in your plan can be a good option if fees are low and investments are strong.
Rolling to a new employer 401(k) may simplify tracking and preserve backdoor Roth eligibility.
Cashing out is rarely smart — it creates taxes and penalties that shrink your savings.
🧭 Why Work with IPS
Fiduciary, Transparent, Tax-Aware Advice
At Investors Portfolio Services, we act as fiduciaries. We analyze your current plan’s actual fund expenses versus an IRA alternative and help you:
Understand tax implications (pre-tax vs. Roth vs. employer stock)
Compare net costs and flexibility
Align rollover choices with your overall retirement strategy
❓FAQs
Common Rollover Questions, Answered
1. What are my main rollover options?
You can: (1) Roll to an IRA, (2) Keep assets in your old 401(k), (3) Move to a new employer’s plan, or (4) Cash out.
2. Will I owe taxes when I roll over?
Not if you do a direct trustee-to-trustee transfer for pre-tax assets. Cashing out is fully taxable and may incur a 10% penalty if you’re under 59½.
3. Do I need to hire an advisor?
No — rollovers are free to complete on your own. We simply help analyze costs and taxes so you can make an informed choice.
4. What about Roth 401(k)s and RMDs?
Roth 401(k)s may be subject to required minimum distributions, while Roth IRAs currently are not for the original owner.
5. What if I hold company stock in my 401(k)?
You may qualify for Net Unrealized Appreciation (NUA) treatment — which could reduce taxes on gains. Ask us before moving employer stock.
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Ready to Compare Your Options?
We’ll run a no-obligation analysis comparing:
Your plan’s internal fund costs
Estimated tax impact
Projected value of staying vs. rolling over
Consult qualified legal, tax, and investment professionals
Past performance is not indicative of future results
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