2. You can roll over your 401(k) to your new employer's plan
Assuming your new employer accepts rollovers, "this is a good option if you like the investment choices and the fees aren't too high," Holeman says. "This way, your money will all be in one account and it'll be easier to manage."
If you aren't happy with the investment options offered by the new plan, or the fees are too high, you have a third option.
3. You can roll over your 401(k) to an individual retirement account (IRA)
Your third option is to move your 401(k) into an IRA or Roth IRA, which is a great option because IRAs "typically have lower fees and more investment choices," Holeman explains.
"They're both retirement accounts — you just get to pick when you pay the taxes," says Holeman of the difference between a traditional IRA and Roth IRA. With a traditional IRA, you contribute pretax dollars and let that money grow tax-deferred over time. You'll pay taxes on your contributions (and investment gains) only when you withdraw the money, which you can do starting at age 59½. If you withdraw before then, you'll have to pay a penalty.
With a Roth IRA, contributions are taxed when they're made, so you can withdraw the contributions and earnings tax-free once you reach age 59½. There is an income cap on the Roth IRA: For 2018, the income phase-out range is $120,000 to $135,000 for singles and $189,000 to $199,000 for married couples who file jointly. And for those who quality, the maximum yearly contribution is $5,500 (or $6,500 for people aged 50 or older).
"Once you know what your options are and what makes sense for you to do from an investment and fee perspective, then you actually have to execute the rollover," says Holeman.