Leave it, roll it, or cash it out. One of those destroys a significant portion of your retirement savings. Here's the complete guide to rolling over a 401(k), why direct rollovers beat indirect, and how to avoid the common mistakes.
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Rolling to a Traditional IRA at Fidelity or Schwab is the best choice for most people. Full investment freedom, low-cost index funds, simpler than managing old 401(k) accounts. Always do a direct rollover (custodian-to-custodian), never touch the money. Cashing out before 59.5 triggers the 10% penalty plus ordinary income tax and forfeits decades of compounding. Don't.
Fine if the plan has excellent low-cost funds. Rare but happens. Bad if the plan has high fees, limited options, or you'll forget about it. Most people end up with scattered old 401(k)s they've lost track of.
Consolidation benefit: one account. Only a good idea if the new plan has good options. Check fees and fund choices before committing.
Full investment freedom: FSKAX, FZROX, VTI, bond funds, anything. Zero cost to roll over. No taxes if done as a direct rollover. The best option for most people.
Worst option, always. 10% penalty under 59.5, plus ordinary income tax on the full amount. $50,000 cashed at 30 in the 22% bracket: ~$34,000 after penalty and tax. Same $50,000 rolled and compounded at 8% for 35 years: ~$740,000. You're giving up $700,000 to have $34,000 now.
Indirect rollover: old plan sends you a check. You have 60 days to deposit it into the new IRA. If you miss the deadline, the entire amount becomes taxable income plus the 10% penalty if under 59.5. Also, the old plan withholds 20% for federal taxes, and you have to make up that 20% from your own pocket to deposit the full amount, then claim it back at tax time. Don't do indirect rollovers unless you have a specific reason.
Rolling Traditional 401(k) to Traditional IRA: no taxes. Rolling to a Roth IRA: conversion, taxes owed now on the converted amount.
Worth considering if you're rolling during a low-income year (between jobs, sabbatical, early retirement). Fills low tax brackets with conversion income. Pairs with the Roth conversion ladder strategy.
IBIT and FBTC (spot Bitcoin ETFs) are available inside a Fidelity IRA. Self-directed IRAs allow direct Bitcoin ownership but are complex, have high fees, and only make sense at very large amounts. For most people, IBIT in a Fidelity rollover IRA is the simplest Bitcoin-in-retirement-account move. See Bitcoin ETF Guide.
Last updated 2026-04-19. Not financial advice. US tax law.