How many jobs have you held since you turned 20? Did you know that the average number of jobs held by a person in their 20’s is seven?

I was shocked when I saw that figure.

In many cases, these people opened up a 401k plan while at their job and then left it with their old employer when they started a new job. If this includes you, you have some options. Here are your four options with dealing with your old 401k plan.

Option #1: Leave It With Your Old Employer

Most plans allow for you to leave your retirement account with your old employer as long as you have at least $5,000 in the plan. If you have less than this, then the plan might automatically liquidate the money and send it to you.

There are both advantages and disadvantages to leaving your 401k with your old employer. First, it’s the easiest thing to do. You don’t have to take any action. However, you won’t be able to invest more into the plan. Also, your 401k most likely charges much higher fees than an IRA account, plus you will have many more investment options in an IRA than you do with the 401k.

Option #2: Rollover Into An IRA

The main benefit of rolling over your old 401k plan was mentioned above: more control and lower fees. You will be able to invest in many more mutual funds and ETFs than you can in your 401k. Also, the lower fees means that you keep more of your money which can compound and grow into a larger balance.

But there are two downsides to rolling over into an IRA. The first is that it takes a little bit of work. The second deals with bankruptcy. Ideally, no one reading this will have to enter into bankruptcy, but it should still be mentioned. Current bankruptcy laws protect employer sponsored retirement plans more so than IRAs. In other words, if you file for bankruptcy, your IRA could be factored into the bankruptcy decision whereas your 401k would not.

Option #3: Rollover Into Current 401k

Rolling over into your current 401k plan allows for much easier management. All of your retirement savings are in one account so you don’t have to remember to monitor various accounts. Unfortunately, not all 401k plans allow for rollovers from previous 401k plans. It’s best to check on this option before you travel too far down the road with it.

If you go this route, be aware of the fees in your current 401k plan as well as the selection of investments. It makes no sense to rollover into your current 401k plan if the plan has high fees and poor investment options.

Option #4: Cash It Out

The final option you have is to simply cash out the old 401k plan and get your hands on the cash. If you do this however, be prepared to pay taxes on the money as well as penalties. In 99% of the cases, this option doesn’t make sense for people. Even if the amount in the 401k plan is small, you are still better off leaving it alone or rolling it over than cashing out the plan.

Final Thoughts

Overall, you really have two options: rollover to an IRA or rollover to your current 401k plan. I say this because the other two options aren’t very good options. Cashing out the old 401k plan will cost you money and leaving it alone doesn’t help you. You can’t add any more money to the account and odds are you are going to forget about it completely.

I personally rolled my old 401k over to my current 401k plan but only because I had amazing investment options and very low fees. If it weren’t for this reason, I would have rolled it over into an IRA.

For most of you, your best choice is to roll over to an IRA. In my previous job, I analyzed many 401k plans and they are loaded with fees – most of which you have no idea you are paying. For this reason, your best choice is an IRA.