What can you do with your old 401(k)?

May 20, 2023 | Robbie Morris

Robbie Morris, CSLP®
Robbie Morris, CSLP®
Hey! I'm Robbie, the founder of Roots Financial Planning, a fee-only, fiduciary advisor located in San Antonio, TX working virtually with dentists across the United States. When I'm not helping dentists live their best life, you can find me making pizza, swimming, or skiing.

Changing dental offices is inevitable for most dentists at least one time in their career. When you change employers that means any employee benefits you have will change as well. One of the most common benefits is a 401(K) plan. Also known as an employer sponsored retirement plan. These plans allow you to set aside money from your paycheck and invest it for the future. Keep reading to find out what your options are for your 401(k) plan when you change dental office jobs.


Option 1: Leave the money in the old 401(k).

Your first option is the simplest. You can simply leave it where it is and do nothing. If the investment options are low cost and fit your needs this could be a viable option. However, there are often other non-investment supporting fees that can still be taken from your account. This is something to keep in mind.

Old 401(k)s are often forgotten by their owners. Leaving the 401(k) with the old company might be a good way to forget you even have the account. We don’t necessarily want that!

Sometimes when you are no longer an employee, the 401(k) will eventually automatically transfer into an Individual Retirement Account (IRA) at the same custodian (the investment firm that operates the account). When this happens, you are being forced into Option 3 (below) and you can proceed to transfer to another custodian if you wish. Generally, the automatic transfer out of the 401(k) usually occurs on smaller account balances. Every plan is different though!

Option 2: Move the money into your new 401(k).

The process of moving money from one 401(k) to another 401(k) or IRA is often referred to as a rollover. The same things we covered in Option 1 should be considered here. Are the investment options low cost and do they fit your needs? If so, then moving the old account into the new one is a good way to keep track of your money and simplify your accounts.

Most 401(k)s have pre-tax and Roth (after-tax) option these days. However, if your new plan does not have a Roth, and you had Roth funds in the prior plan, you would not be able to move those particular funds into the new 401(k).

Another reason to keep pre-tax money in your 401(k) is because you are performing backdoor Roth IRA contributions. This will help you avoid unwanted taxes (often referred to as the pro-rata rule). Backdoor Roth IRAs will be discussed at another time.

Additionally, if you’re over age 70 and still practicing, you won’t be forced to take required minimum distributions (RMD) from your 401(k). RMDs are required from IRAs once you reach age 72 or 73 (depending on when you reach those ages at the time of this writing).

Keep in mind that all 401(k) plans have slightly different rules. This means that some plans do not accept incoming rollovers. Be sure to check on this before proceeding.

Option 3: Move the money into an IRA.

This option is great if you want to have full control of your investment options.

Most of the time, 401(k)s have a limited set of investment options. There might be 20 different funds (mutual funds or ETFs) to choose from across many different categories. Meaning they offer some US funds, international funds, bond funds, real estate funds, etc. However, it is only limited to those 20 options.

If you choose to move your money to an IRA at another custodian, you will likely have access to several thousand funds as well as individual stocks (depending on the custodian). This allows for ultimate freedom of investment choice.

Another benefit of moving to an IRA is avoiding any additional 401(k) fees that existed outside of fund fees.

Lastly, moving to an IRA is useful if you plan on converting any pre-tax dollars into a Roth IRA (post-tax).

Option 4: Deposit the money into your bank account.

This is the last option for a reason. This is not recommended. If you are under age 59.5 and make a withdrawal you will owe taxes and penalties. There are several exceptions to these penalties though they are generally uncommon.


There are several ways to handle an old 401(k) when you change offices. The option that is best for you will depend on your goals, the types of accounts you have available, and what your new 401(k) allows. Don’t let your old 401(k) be forgotten! Take action to make sure it is invested appropriately or consolidated with other accounts.