Your old 401(k) after a layoff

• $0Tax to leave it where it is
• $7,000At or under this, the plan can move it out without asking
• 55Leave in or after the year you turn 55 and payouts here skip the 10% tax
• $0New paycheck contributions once you're off payroll
• Tax dayDeadline to put an offset 401(k) loan into an IRA, with extensions
• 73Age required withdrawals start

• The money stays in the same funds, and statements keep coming from the same company (Fidelity, Empower, Vanguard, and so on).
• Money you put in is 100% yours. Employer money follows the plan's vesting schedule, so unvested amounts can be lost when you leave.
• Balance of $7,000 or less, not counting money you moved in from an earlier job? The plan can pay it out after sending notice. Over $1,000 goes to an IRA the plan picks. At $1,000 or less, you can get a check with 20% withheld.
• Leave in or after the year you turn 55 and withdrawals from this plan skip the 10% additional tax. For qualified public safety workers, it's age 50 or 25 years of service.
• Leaving it doesn't pause a 401(k) loan. When the plan subtracts an unpaid loan in good standing from your balance after you leave, you have until your tax filing deadline, including extensions, to put that amount into an IRA and keep it from being taxed.
• Under federal law, 401(k) money has unlimited protection from creditors. For IRAs, protection outside bankruptcy depends on your state.
• Big plans can offer lower-cost institutional fund shares that aren't available in an IRA.
• Lose track of it later? The DOL's Retirement Savings Lost and Found database searches for old plans by Social Security number.

Sources:IRS: Exceptions to the 10% taxIRS Notice 2026-13IRS: Form 1099-R instructionsIRS: Plan loan FAQsFINRA Regulatory Notice 13-45DOL: Retirement Savings Lost and Found

Leave it and nothing changes: same funds, same statements, no tax. It works well if your old plan's fees are low, or if you left in the year you turned 55 or later, since this plan lets you take money out without the 10% tax. The catch is drift - you can't add to it, and an old account with an old address is how money goes missing.

If the catch is a dealbreaker: Want one account with more choices? A direct transfer to an IRA has no tax and no withholding.

• $0Tax or withholding on a direct transfer from the plan
• 20%Withheld if the plan pays you instead of the IRA
• 60 daysTo deposit a check paid to you, making up the 20% from other money
• $30,000About what a 1% fee costs vs 0.25% on $100,000 over 20 years (SEC)
• $7,5002026 IRA contribution limit, $8,600 at 50+
• No loansBorrowing from an IRA makes the whole account taxable
• 59½Age when IRA withdrawals skip the 10% tax

• Open the IRA first, then ask for a direct transfer: the plan sends the money to the IRA company, or makes the check out to it. No tax and nothing withheld.
• The once-every-12-months limit on IRA-to-IRA moves doesn't apply to money coming from a 401(k).
• Roth 401(k) money moves to a Roth IRA with no tax. The Roth IRA's 5-year clock counts from your first Roth IRA contribution, not your first Roth 401(k) contribution, so with no Roth IRA yet, the clock starts the year you move it.
• After-tax money in the plan can go to a Roth IRA while the pre-tax money goes to a traditional IRA, as part of the same payout.
• IRAs lose the age-55 exception but add others: health insurance premiums after 12 weeks of unemployment pay, college costs, and up to $10,000 for a first home.
• A pre-tax IRA balance makes a later backdoor Roth partly taxable, because Form 8606 counts all your traditional IRA money.
• Company stock in the plan? Check its net unrealized appreciation with the plan first - moving the shares into an IRA gives up that tax treatment.
• In federal bankruptcy, money moved in from a 401(k) is fully protected and doesn't count toward the $1,711,975 IRA cap. Outside bankruptcy, protection depends on state law.
• The person pitching the move may earn a commission or fee from it. BrokerCheck shows how they're registered.

Sources:IRS: Moving retirement moneyIRS Notice 2026-13IRS: After-tax contributionsIRS: 2026 contribution limitsSEC: How fees affect your portfolioFederal Register: Bankruptcy amounts

A direct transfer puts the money in an IRA in your name, with no tax and nothing withheld. It suits people who want one account and more choices than a plan menu. The catch: you're the fee police now, and if you left at 55 or older, money taken out before 59½ faces the 10% tax again.

If the catch is a dealbreaker: Between 55 and 59½ and likely to need the money? Leaving it in the plan keeps the penalty exception.

• $0Tax or withholding on a direct transfer between plans
• $50,000Loan cap, or half your vested balance if that's less
• $24,5002026 limit on what you put in from your paycheck
• $8,000Extra catch-up at 50+ in 2026, $11,250 at ages 60-63
• 73Required withdrawals can wait past this while you still work there
• No capFederal creditor protection under ERISA

• Plans don't have to take money from an old plan. HR or the new plan's administrator can tell you whether it accepts a direct transfer.
• Once it's in, the new plan's rules apply: its funds, fees, loan options, and withdrawal rules.
• The age-55 exception follows your departure from the new employer, so it doesn't help while you still work there.
• Roth 401(k) money moved by direct transfer keeps its 5-year clock, counted from your first Roth contribution at either plan.
• Pre-tax money in a 401(k) doesn't count against a backdoor Roth the way a pre-tax IRA balance does.
• Required withdrawals from your current employer's plan can wait until you retire, unless you own 5% of the company. Old plans and IRAs start at 73.
• Company stock with net unrealized appreciation generally loses that tax treatment if you move the shares into another plan.

Sources:IRS Notice 2026-13IRS: RMD FAQsIRS: Designated Roth account FAQsFINRA: Your 401(k) choices

A direct transfer folds the old account into your next employer's plan, with no tax. It suits anyone starting a job with a solid, low-cost plan who wants one account and access to loans. The catch: you need the job first, and the plan has to say yes.

If the catch is a dealbreaker: No new job yet? Leaving it in the old plan keeps this move open for later.

• $20,000Balance cashed out, before state tax
• $4,000Withheld up front, so the check is $16,000
• $2,00010% additional tax for leaving before the year you turn 55
• $2,400Federal income tax in the 12% bracket
• $4,400Federal income tax in the 22% bracket
• $15,600Kept in the 12% bracket
• $13,600Kept in the 22% bracket

• The plan withholds 20% for federal tax. If your actual bill is higher, you pay the rest when you file. If it's lower, you get the difference back.
• In the 12% bracket, $20,000 owes $4,400 in total, about $400 more than was withheld. In the 22% bracket it owes $6,400, about $2,400 more at filing.
• The payout counts as income for the year and can push part of it into a higher bracket. For a single filer in 2026, the 12% bracket runs to $50,400 of taxable income and the 22% bracket to $105,700.
• State income tax can add more, depending on where you live.
• Left this job in or after the year you turned 55? The 10% tax doesn't apply to this plan's payout, though income tax still does. For qualified public safety workers, it's age 50 or 25 years of service.
• Other exceptions to the 10% tax include total and permanent disability, terminal illness, and 1 emergency withdrawal of up to $1,000 a year if the plan offers it.
• Changed your mind? You have 60 days to deposit the money in an IRA, including the withheld 20% from other funds, and undo the tax.
• Company stock taken out as shares in one lump sum may qualify for net unrealized appreciation treatment. The plan can give you the number before you sell.

Sources:IRS Notice 2026-13IRS: 2026 tax bracketsIRS: Moving retirement moneyIRS Topic 412: Company stock

The plan sends you the money, minus 20% withheld. It fits a real cash emergency where cheaper help is out of reach, or anyone who left in the year they turned 55 or later, since they skip the 10% tax. The catch is the math: $20,000 under 55 leaves $13,600 to $15,600, before state tax.

If the catch is a dealbreaker: For bills, lender hardship programs and nonprofit credit counseling cost less than 10% off the top - our bills guide lists them.