Getting a new job is stressful. You have to familiarize yourself with an entirely new company and learn entirely new job functions and processes. And when it comes to tying up any loose ends from your old job, deciding how to handle your old employer-sponsored 401(k) is probably the last thing on your mind.

It’s easy to procrastinate making decisions about your retirement savings, but that doesn’t mean you should. Here’s what to do with your 401(k) after leaving a job.

4 dos and don’ts of an old 401(k)

If you have a 401(k) from an old job, you’ve got a few options to work with. Here’s what to consider.

1. Don’t cash out

Unless you’re 59 and a half years old or have a financial hardship, don’t cash out on your old 401(k). If you withdraw your 401(k) before you’ve reached the age requirement, you’ll be faced with a 10% tax penalty.

Cashing out your 401(k) means you’re stopping the investment growth before it fully matures, which can hurt your retirement savings. Instead, leave your money alone for as long as possible. Required minimum distributions (RMD) for traditional 401(k)s start at 70 and a half years of age. While it’s possible to take money out before this time without facing a penalty, it’s often beneficial to wait as long as possible before you start taking money out.

2. Don’t ignore it

Although it can be easy to leave behind your old 401(k), it can hurt how much you collect later on. If you leave your old 401(k) alone, fees can still build up even if you’re not contributing. That means less money for you by the time you retire.

While leaving your money in your old 401(k) is an option, your previous company is responsible for it. If your old employer determines they don’t want to manage it, you usually have 60 days to move it somewhere else. If you don’t move the funds to another retirement account, they could send the money directly to you, which means you could face early withdrawal and tax penalties.

Before you leave your old job, discuss your options with the HR department or 401(k) administrator to see what requirements you may need to follow.

3. Do consider moving your old 401(k) to your new company’s 401(k)

If your new employer offers a 401(k), check out the terms and rates and compare them against your old one. You’ll want to consider administrative fees, the number of investment options available and how much — if any — your employer will match.

If your new 401(k) offers competitive rates and matches contributions, it may be worth moving your old one over. Take the time to manage the rollover from your former employer to your new one. It might seem like a hassle, but the money you’ll be earning is worth your time.

4. Do research rolling your old 401(k) into an IRA

If your new company doesn’t offer a great 401(k) plan — or doesn’t offer one at all — consider opening up an Individual Retirement Account (IRA) and rolling over your funds. Whether you open a traditional or Roth IRA, you can roll over your old 401(k) into an independent investment account separate from your employer.

If you’re unemployed or now work for yourself, rolling your 401(k) into an IRA is a good option to ensure your retirement money has a home until you need it.

When should you perform a 401(k) rollover?

In general, the sooner you perform the rollover, the better.

If your old employer chooses not to consider managing your account, you’ll typically have 60 days to move your old 401(k) to its new home. If you don’t move it within those 60 days, the government will classify the funds as taxable income, placing a 10% tax penalty on the early distributions.

There are two rollover options to consider:

• Direct rollover: This is when your plan administrator moves your old 401(k) to your new 401(k) plan or IRA. The old plan administrator usually signs a check over to the new institution, which won’t require you to make any deposits or withdrawals. You won’t get penalized or taxed with a direct rollover.
• Indirect rollover: If your plan administrator makes a check out to you directly — called an indirect rollover — you’ll have 60 days to put that money into a qualified retirement plan before getting hit with fees.

Bottom line

Leaving an old job to start a new one can be both exciting and challenging. You’ll likely receive paperwork from HR upon your departure reminding you of your 401(k) plan options. You’ll want to be sure to stay on top of your plan and its ownership so you don’t lose it or forget about it — leaving money behind.