What happens to my 401(k) after I leave my job?

By Kaz · Published 28 September 2026 · How this site checks figures

Summary

Usually nothing, at least not right away. The balance stays in your old employer's plan until you ask for something else, and the IRS lists four choices: leave it, roll it to a new employer's plan, roll it to an IRA, or withdraw it. The exceptions are a small balance, which the employer may require you to move, and an outstanding plan loan, which the plan can call in full.

The money stays put, with two exceptions

The IRS gives three reasons to keep a balance in the old plan: you like its investment options, it has low fees, or you plan to move the money into a new employer's plan later. Only the vested part of the balance is yours, though, so unvested employer contributions on your final statement may not be there when you look again. The comparison between staying and moving is its own article on keeping an old 401(k).

If the balance is small, the IRS notes that your employer "may require you to move it"; how that works is covered in the article on small balances.

The other exception is a plan loan, which doesn't survive the job automatically. The IRS says plans "may require an employee to repay the full outstanding balance of a loan" at termination, and what isn't repaid is treated as a distribution and reported on Form 1099-R. Putting the same amount into an IRA or a new plan by that year's tax-return deadline, extensions included, keeps it from being taxed right away. The article on 401(k) loans when you leave walks through the timing.

When a tax bill does show up

Two moves create taxable income. The first is rolling pretax money to a Roth IRA, where "you must include the untaxed amount in your gross income for the year." The second is taking the money.

Ask for a lump sum and the plan "usually withholds 20%" for federal income tax. You still have 60 days to roll the distribution into an IRA or new plan, but the withheld part has to come from other money. On a $50,000 balance, for example, the plan sends $40,000 and withholds $10,000; rolling over all $50,000 means adding $10,000 of your own within the 60 days. Whatever isn't rolled over is income, and you "may have to pay an additional 10% early distribution tax if you aren't at least age 55." That age-55 line covers plan distributions after you separate from service in or after the year you turn 55. An IRA doesn't have it; its early-withdrawal age stays at 59½. For your own balance, the page on 60-day rollovers and withholding does the sums.

Sources

Written by Kaz, an independent publisher.
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