One of the benefits of a 401k retirement plan is that it can follow an employee throughout his or her career. When changing employers, the investor has four options:

1.) Leave his/her assets in the old employer’s 401k retirement plan
Many 401k plan administrators charge record keeping and other fees to manage your account, regardless of whether you are still with the company. These fees can take a significant bite out of your future net worth, especially if you have accounts maintained at several different employers.

2.) Complete a 401k rollover to the new employer’s 401k plan
Practically speaking, this option is only available if the employee has another job offer before leaving their current employer. In some cases, it may be the best option as it is simple. How do you know if it is the right choice? The decision should largely be made based on the investment options of the new 401k plan. If you are unsatisfied with the choices available to you, completing a 401k rollover to an IRA may be a better option.

3.) Complete a 401k rollover and move the assets to an Individual Retirement Account (IRA)
Completing a 401k rollover could be the best choice for those interested in providing for a comfortable retirement since it allows the investor’s capital to continue its tax-deferrel while providing more control over asset allocation (i.e., you aren’t limited to the investments offered by the 401k plan provider.) Here’s how it works: A distribution of the current 401k plan assets is ordered (this is reported on the IRS Form 1099-R.) Once the assets are received by the employee, they must be contributed into the new retirement plan within sixty days; this deposit is reported on IRS Form 5498. The government limits 401k rollovers to once every twelve months.

4.) Cash out the proceeds, taxed as ordinary income inaddition to a 10% penalty before 591/2
With the exception of failing to take advantage of an employer’s contribution match program, cashing out a 401k when leaving jobs may be the least attractive decision an individual can make. According to a press release by the 401K Help Center, research indicates “as many as 66 percent of Generation X job changers take cash when leaving their jobs, and 78 percent of workers aged 20-29 take cash.” The consequences may be far greater than the taxes and penalty fee alone; indeed, the greater financial loss comes from the decades of tax-deferred compounding that capital could have earned had the account owner chosen to initiate a 401k rollover

5.) If the proceeds are not properly rolled over into another qualified plan, either an IRA or 401k you could be subject to early withdrawl penalties inaddition to regular income tax.  Please consult your tax professional for additional information