What Happens To Your 401k When You Change Jobs?

What Happens To Your 401k When You Change Jobs?

In the dynamic economy of the Bay Area, job changes are very common. When these changes occur, employees often grapple with critical decisions regarding their 401k plan assets, an essential component of their financial plans for high-net-worth individuals and couples. To enhance your 401k strategy, it pays to understand the underlying principles, know your options, and make informed decisions when you take the next step. 

As experienced financial planning specialists in San Ramon, Humanity Wealth Advisors is here to guide you through the process and help you navigate the uncertainties when you change jobs.

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Understanding the Basics of 401k

The first step towards mastering 401k management is understanding what it is and why it’s important in your financial planning strategy. A 401k is a retirement savings plan sponsored by your employer. It lets you save for retirement using pre-tax dollars and invest in a tax-deferred account until you start taking taxable distributions.

Your company or employer may decide to make a matching contribution which is a tax deduction for the company and tax-exempt for you, again until you start taking distributions.  This is the best way to accumulate assets for your retirement years. 

Humanity Insights: Your best strategy is to maximize pre-tax contributions to 40ks and IRAs that accumulate assets in tax-deferred accounts.

Assessing Your Current 401k Situation

Before making any decisions, take the time to review your current 401k thoroughly. Understand your investment choices, check for outstanding loans, and analyze the fee structure. Matching your investments to your risk tolerance is vital to this audit process. 

Every investor has a unique risk tolerance, which shapes how they should approach their 401k investments. Younger participants take more risks because they have longer recovery times. Older participants are more risk-averse because they are closer to retirement. Assessing these factors is key to forming a comprehensive picture of your current financial well-being.

Options for Handling Your 401k When Changing Jobs

The Bay Area is a vibrant job market, often leading to frequent job changes. If you are changing jobs, it’s essential to understand your options regarding your 401k. The main ones are:

  • Leave It With Your Previous Employer: If your former employer allows it, you can leave your 401k assets with their plan. However, there might be better options than this, particularly if it limits your control over your assets.
  • Roll It Over to Your New Employer’s 401k: You can transfer/roll over your old 401k assets to the new employer’s plan, provided they offer one. This is often a straightforward process but can limit your investment choices to the options provided by the new plan.
  • Roll It Over to an Individual Retirement Account (IRA): Rolling your 401k to an IRA often provides more control and a broader range of investment choices.
  • Cash It Out: This is generally the least advisable option as it incurs immediate tax consequences, including a penalty for an early withdrawal if you are under 59 1/2.

Making Informed Decisions – Seek Professional Advice

Managing a 401k, especially during a job transition, can be complex. Given the critical role your 401k plays in your long-term financial planning, seeking professional guidance is advisable. High net worth financial planning requires specialized expertise to navigate these complex choices. At Humanity Wealth Advisors, we provide tailored advice based on your financial situation and help you maximize your 401k assets for your future use.

Humanity Insights: Every extra dollar of tax or expense is one less dollar you will have available for your future use.

Implementing Your Chosen Strategy

Once you’ve assessed your situation and decided on the best action, it’s time to implement your strategy. Transferring your 401k assets into an IRA, transferring them to a new employer’s plan, or leaving them with your old employer requires careful planning and execution. Remember that some actions may generate taxes and penalties, so consult a Bay Area financial advisor before you make any financial decisions.

Monitoring and Adjusting Your Retirement Strategy

Financial planning is not a set-it-and-forget-it decision. The economic environment, current circumstances, and financial goals change over time. Regular monitoring of your retirement strategy and making necessary adjustments is crucial. Remember, financial planning in the Bay Area, especially concerning retirement savings, requires staying flexible and responsive to what is happening around you.


Making the right 401k decisions when changing jobs is essential to pursue your short- and long-term financial goals and aspirations. It can be the difference between a comfortable retirement and compromises you would rather not make in your golden years. 

Humanity Wealth Advisors provides success-driven individuals and couples with the guidance they need to make objective, informed 401k decisions when they change jobs.

Our team takes a holistic approach that includes all your accounts for accumulating retirement assets. We emphasize 401k and IRA assets because they are usually the largest. 

What about the future? Making the right decisions when you change jobs is an important process. Make the right decisions, and you have a better chance to pursue your retirement plans. It is that simple, and Humanity Wealth Advisors is here to guide you through your financial decision-making process.  

Through meticulous planning, careful execution, and regular monitoring, we help our clients steer their best financial course in the vibrant Bay Area job market. Connect with us to learn more about 401k career transition services. 

Humanity Wealth Advisors and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation.

More about the author: Harry Sherdil

As a fiduciary financial advisor at an independent firm, Harry strives to offer the same resources, tools, and research as bigger firms while serving new and existing clients' best interests.