One option is to leave your money in your former employer’s 401(k). If you like the way the money is invested or if your new employer doesn’t have a 401(k) plan or if your new employer’s 401(k) plan has higher fees or a lower performance than your last employer’s, you can usually leave your money in place.
Just make sure that you know where it is. You’re likely to move company several times during your career. When you retire, you’ll be eligible for payments from each of those 401(k) plans so make sure that you don’t forget any.
Forgetting about an old 401(k) isn’t the only risk that comes from leaving your money with a previous employer. It’s also possible to borrow from your 401(k). While that’s not always a good idea, it can be a better alternative than cracking open a retirement account and paying the penalties or taking a high interest loan from a bank. It’s a viable option if you find yourself with a sudden need for cash. And because you’re borrowing from yourself, it’s usually quick, relatively easy and doesn’t affect your credit rating.
If you leave your 401(k) with a previous employer though, you can no longer borrow from it. It can also become harder to track it so that you have less idea how close you are to building the retirement fund you want.
The alternative is to roll the 401(k) into your new employer’s fund.