What to Do With Your Retirement Assets When You Switch Employers

Are you in the market for a career or job change? Or have you switched employers at least once over the course of your career? If so, you’ll want to make sure you take your retirement assets with you when you go or double-check to make sure you didn’t leave any behind.

Abandoned retirement accounts are a real thing. In fact, the Department of Labor offers resources and search options for abandoned plan programs. That’s how prevalent unclaimed retirement benefits are in the United States. And according to the Bureau of Labor Statistics, baby boomers have held an average of 11.7 jobs between the ages of 18 and 48, with many of the younger baby boomers having over 15 different jobs before retiring. Therefore, it stands to reason that how to manage retirement assets during these career transitions is of high relevance to most working people.

There are a few options of what you can do with your retirement assets when you switch jobs. Deciding which option is right for you depends on your specific set of circumstances, but here are three ways you can manage your retirement assets upon transitioning from one employer to the next.

Option #1: Leave Your Retirement Assets in Your Former Employer’s Retirement Plan Program

While you can do this, I don’t recommend it in most instances. Legally, you have every right to stay in the plan. Realistically, it rarely serves your best interests to stay in a former employer’s retirement plan program from a long-term investment standpoint.

When you are no longer an employee, your investment options may become limited. You also might not have the same access to your assets as you did as an employee, and the fees you pay to have your retirement assets managed will likely rise. The reason your fees will likely be higher as a non-employee is that your former employer will most certainly stop contributing toward your account management fees, placing the responsibility squarely on you.

So, leaving your retirement assets in your former employer’s retirement plan program is perhaps a good short-term solution at best. It can allow you to stay invested while you figure out which of these next two options makes the most sense for you. But do I ever think it’s a good idea to leave your retirement assets behind when you switch jobs? No. Take them with you.

Option #2: Roll Your 401(k) into Your New Employer’s 401(k) Plan Program

Employer-sponsored retirement plans can be great investment vehicles toward saving for retirement. These are especially attractive when your company offers to match your contributions. Receiving free money to fund your retirement is a benefit you don’t want to leave unclaimed.

So then the question becomes: “Do you roll your entire former 401(k) into your new employer’s sponsored retirement program?” Just because it’s a good idea to participate in your new employer’s retirement plan program, rolling all of your retirement assets into it may or may not be your best bet, but how can you know?

You will want to closely examine your new plan options and assess whether the new plan meets your investment needs. You shouldn’t just assume that your next employer’s retirement plan program will meet your financial needs and goals for retirement. This is where consulting with a fiduciary financial advisor beforehand can be incredibly helpful.

Having an objective third party review your investment options within the context of your specific situation and goals can undoubtedly help you determine how much, if any, of your old assets should find its way into your new plan.  OR if you should simply start funding the new plan fresh while exercising your third option of what you can do with your retirement assets when you switch employers.

Option #3: Roll Your Employer-Sponsored 401(k) into an Individual Retirement Account (IRA)

Rolling your old employer-sponsored 401(k) into an IRA is likely the best option, and it’s one I help many of my clients navigate. An IRA provides you with the most control and flexibility over your retirement assets. You’re not limited by the investment choices your employer provides. Instead, you have a vastly greater number of choices when it comes to investments so that you can create a retirement portfolio that best matches your needs.

Furthermore, given the data that indicates a high propensity that you’ll change jobs again in your career, having an IRA already set to your needs can be where all former employer retirement plans go when you transition. Another reason I especially like the IRA option is that you can keep your fees low, your investment strategy personalized, and maintain maximum flexibility so you can adjust accordingly as your income and overall financial situation changes.


The important key takeaways are:

1.) You should be investing in your retirement.

2.) You should take your retirement assets with you when you switch employers.

3.) You should confer with a fiduciary financial advisor over how best to invest your retirement assets to meet your financial needs and goals.

Having retirement assets and investing your money is just the starting point of your financial journey. Investing wisely so that you can create the life of your dreams is an opportunity you don’t want to take lightly.

If you have questions about what you should do with your employer-sponsored retirement assets or your overall investments, I invite you to contact me directly so we can explore your situation individually.