If you've ever changed jobs and left your 401k sitting at your old employer, you're not alone. According to Department of Labor data, there are over 29 million forgotten 401k accounts in the United States — each representing a person who meant to do something about it, eventually.
The good news: there's no rule saying you have to roll over immediately. But there are meaningful reasons to act sooner rather than later — and a few situations where waiting actually makes sense.
When You Should Roll Over Right Away
The case for moving quickly is mostly about consolidation and control. When your retirement savings live at a former employer's plan, you're subject to their fund lineup, their fee structure, and their administrative decisions. If the company is acquired, restructures, or changes plan administrators, your account can get caught in transition limbo.
Rolling into an IRA or your new employer's 401k gives you a single, organized picture of your retirement savings. You can choose your own investments, often access lower-cost index funds, and avoid the cognitive overhead of tracking an account you no longer contribute to.
The best rollover is the one that actually happens — not the one you've been meaning to do since your last day at the office.
If your old 401k balance is above $5,000, your former employer is required to keep the account open and invested. But if your balance is between $1,000 and $5,000, they're permitted to roll it into an IRA on your behalf — at an institution of their choosing, not yours. Below $1,000, they can simply cut you a check (subject to 20% withholding).
When It Makes Sense to Wait
There are situations where a rollover isn't the obvious right move. If you're between 55 and 59½ and recently left your job, your current 401k may offer penalty-free withdrawals under the IRS Rule of 55 — a benefit that disappears if you roll to an IRA. Rolling too quickly can eliminate a valuable early-access window.
Similarly, if your old employer's 401k holds company stock with a very low cost basis, you may want to explore Net Unrealized Appreciation (NUA) treatment before rolling. Under NUA rules, you can pay ordinary income tax on the cost basis now and long-term capital gains rates on the appreciation later — potentially saving thousands.
The Rollover You Should Never Do
One move to avoid at all costs: taking the distribution as a check and depositing it yourself. If you don't complete the rollover within 60 days, the IRS treats it as a distribution — subject to income tax plus a 10% early withdrawal penalty if you're under 59½. Your former employer is also required to withhold 20% upfront, which you'd have to make up out of pocket to avoid being taxed on the missing amount.
Always use a direct rollover — institution to institution — where you never touch the funds.
Where to Roll To
Most people choose between their new employer's 401k and an IRA. New 401ks offer the simplicity of consolidated accounts and creditor protection in most states; IRAs offer broader investment choices and more flexible estate planning options. Neither is universally better.
An RMR advisor can help you think through the specific factors at play in your situation — the old plan's fee structure, your new employer's offerings, your timeline, and your overall retirement picture. The right answer is almost always personal.