July 25


Maximizing Your Retirement: What to Do with Old Retirement Accounts?

By Harrison O'Reill

July 25, 2023

If you’ve recently left a job or retired, you may be wondering what to do with your old retirement accounts. Making informed decisions about these accounts is important to ensure you maximize your savings and minimize any potential tax consequences. In this article, we’ll explore some of the options available to you and provide guidance on how to choose the best path forward.

One option for dealing with old retirement accounts is to roll them over into a new account. This can be a good choice if you want to consolidate your accounts and simplify your finances. Another option is to leave the account where it is, especially if you’re happy with the investment options and fees.

However, if you’re not satisfied with your account’s performance or are concerned about fees, it may be time to consider other options. We’ll discuss these and more in the following paragraphs.

Retirement Planning

When it comes to retirement planning, there are several options available for individuals with old retirement accounts. Here are some key sub-sections to consider:

Retirement Plan Options

If you have an old 401(k) or employer-sponsored retirement plan, you may have the option to leave the funds in the plan, transfer them to a new employer’s plan, or roll them over into an individual retirement account (IRA).

Investment Options

When deciding how to invest your retirement funds, consider your risk tolerance and investment goals. Options include mutual funds, index funds, and robo-advisors.

Contribution Limits

Be aware of contribution limits for different retirement accounts, such as the annual contribution limit for IRAs.

Tax Treatment

Different retirement accounts have different tax treatments, such as tax-deferred growth or tax-free withdrawals. Consult with a tax professional to understand the tax implications of your retirement plan options.

Account Types

There are several types of retirement accounts, including traditional IRAs, Roth IRAs, and 401(k) plans. Each has its own rules and benefits.

Asset Allocation

Diversifying your retirement portfolio across different asset classes can help manage risk and maximize returns.

Lower Fees

Consider the fees associated with your retirement account, such as management fees or account minimums. Lower fees can help increase your overall returns.


Some retirement plans offer insurance options, such as annuities or life insurance. Consider your insurance needs when making retirement plan decisions.

Required Minimum Distributions

Be aware of required minimum distributions (RMDs) for certain retirement accounts, such as traditional IRAs and 401(k) plans. Failing to take RMDs can result in penalties.

Overall, it’s important to carefully consider your retirement plan options and consult with a financial advisor or tax professional before making any decisions.

Leaving Your Job

When you leave a job, you have several options for what to do with your old retirement account. The choice you make can have a significant impact on your financial future. Here are the most common options:

Cashing Out

Cashing out your old 401(k) might seem like an easy option, but it’s usually not the best choice. You’ll have to pay taxes on the money you withdraw; if you’re under 59 ½ years old, you’ll also have to pay a 10% penalty. Plus, you’ll be losing out on the potential for compound interest and growth over time.


Rolling Over to a New Employer’s Plan

If your new employer offers a 401(k) plan, you can roll over your old 401(k) into the new plan. This option can be convenient because you’ll have all your retirement savings in one place. However, you’ll want to make sure the new plan has low fees and offers good investment options.

Rolling Over to an IRA

Rolling over your old 401(k) into an individual retirement account (IRA) can give you more control over your investments. You’ll have a wider range of investment options and can choose a provider with lower fees. Plus, you won’t have to worry about your employer changing plans or going out of business.

Direct Transfer Rollover

Do a direct transfer rollover if you roll over your old 401(k) to a new employer’s plan or an IRA. This means the money goes directly from one account to the other without you ever touching it. If you withdraw the money and then try to deposit it into a new account, you’ll have to pay taxes and penalties.

Leaving your job can be a stressful time, but it’s important to take the time to make the right decision about your retirement account. Consider your options carefully and seek advice from a financial professional if you’re not sure what to do.

Early Withdrawals and Penalties

Early Withdrawal Penalties

If you withdraw money from your retirement account before you reach age 59 1/2, you will likely face an early withdrawal penalty of 10% on the amount you withdraw. This penalty is in addition to any income tax you may owe on the distribution.

For example, if you withdraw $10,000 from your IRA before age 59 1/2 and you are in the 22% tax bracket, you would owe $2,200 in taxes plus a $1,000 early withdrawal penalty for a total of $3,200.

Penalty-Free Withdrawals

There are some circumstances where you may be able to withdraw money from your retirement account before age 59 1/2 without incurring the early withdrawal penalty. These include:

  • Disability: If you become disabled and are unable to work, you may be able to withdraw money from your retirement account without penalty.
  • Higher education expenses: You can withdraw money penalty-free to pay for qualified higher education expenses for yourself, your spouse, your children, or your grandchildren.
  • First-time home purchase: You can withdraw up to $10,000 penalty-free to help pay for a first-time home purchase.
  • Medical expenses: You can withdraw money penalty-free to pay for qualified medical expenses that exceed 7.5% of your adjusted gross income.

It’s important to note that while these withdrawals may be penalty-free, you may still owe income tax on the distribution.

In summary, early withdrawals from retirement accounts can be costly due to the early withdrawal penalty and income tax. However, there are some circumstances where you may be able to withdraw money penalty-free. It’s important to weigh the potential costs and benefits before making any decisions about early withdrawals from your retirement account.


Expert Advice

When it comes to managing old retirement accounts, seeking expert advice can be a smart move. Financial advisors and robo-advisors are two options to consider.

Financial Advisors

A financial advisor can provide personalized advice and guidance on how to manage your retirement accounts best. They can help you assess your investment goals, risk tolerance, and overall financial situation to create a tailored plan for your retirement savings.

There are many resources available to help you find a financial pro, such as Advisor Resources and the SmartAdvisor Match platform from SmartAsset. It’s important to note that some financial advisors may be compensated differently, so asking about their fees and any potential conflicts of interest is important.


Robo-advisors are a newer option that uses algorithms and technology to manage your investments. They can offer lower fees and a more hands-off approach compared to traditional financial advisors.

Many robo-advisors are also Certified Financial Planners (CFP®), which can provide added peace of mind. However, it’s important to do your research and compare different robo-advisors to find the best fit for your needs.

In summary, seeking expert advice from a financial advisor or robo-advisor can be a wise decision when it comes to managing old retirement accounts. Consider your individual needs and preferences to determine which option is right for you.


There are several options available to individuals with old retirement accounts. It’s important to assess your individual financial situation and goals before deciding which option is best for you.

If allowed, one option is to roll over your old retirement account into your current employer’s plan. This can simplify your retirement savings and potentially reduce fees. Another option is to roll over your old retirement account into an IRA. This can provide more investment options and potentially lower fees.

You can consider withdrawing the money if you need access to your old retirement account funds. However, keep in mind that this may result in taxes and penalties. Finally, if you have multiple old retirement accounts, consolidating them into one account can simplify your retirement savings and potentially reduce fees.

Overall, it’s important to carefully consider your options and consult with a financial advisor before making any decisions regarding your old retirement accounts.

Frequently Asked Questions

Q. What happens if I leave my retirement account with my former employer?

If you leave your retirement account with your former employer, you may be unable to contribute anymore. However, the account will continue growing based on your chosen investments. You’ll also continue to be subject to any fees associated with the account.

You may want to consider rolling over the account to a new employer’s plan or an individual retirement account (IRA) to have more control over your investments and potentially lower fees.

Q. Can I roll over my retirement account to a new employer’s plan?

It depends on the rules of the new employer’s plan. Some plans allow for incoming rollovers, while others do not. You’ll need to check with your new employer’s human resources department or plan administrator to see if it’s an option. If it is, you’ll need to initiate a direct rollover from your old plan to the new one to avoid any tax implications.

Q. What is a direct rollover?

A direct rollover is when your retirement account balance is transferred directly from one account to another without you receiving the funds. This is the preferred method of rollover to avoid any tax implications or penalties.

You’ll need to initiate the rollover with your old plan administrator and provide the necessary information for the transfer.

Q. Can I do an indirect rollover?

An indirect rollover is when you receive the funds from your old retirement account and deposit them into a new account within 60 days.

This can be risky because you’ll be subject to taxes and penalties if you don’t deposit the funds within the 60-day window. Avoiding an indirect rollover and opting for a direct rollover instead is best.

Q. What is a Rollover IRA?

A Rollover IRA is an individual retirement account specifically designed to receive funds from a retirement plan rollover. It allows you to continue growing your tax-deferred retirement savings and gives you more control over your investments.

You can also consolidate multiple retirement accounts into one Rollover IRA to simplify your finances.

Q. What are Required Minimum Distributions (RMDs)?

Required Minimum Distributions (RMDs) are the minimum amount you must withdraw from your retirement account each year once you reach age 72 (or age 70 ½ if you turned 70 ½ before January 1, 2020).

The amount is calculated based on your account balance and life expectancy. Failing to take RMDs can result in significant tax penalties.

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