If You Change Jobs Often, Can You Still Save With a 401(k)?

Quick Answer

Yes, you can save in a 401(k) if you change jobs often. Plus, by law you have 30 days after you switch jobs to decide the best strategy to secure your financial future.

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If you're like many people, it's possible you'll switch jobs multiple times during your career. Currently, 1 in 5 workers say they are somewhat or very likely to look for a new job in the next six months, according to a 2022 survey by Pew Research. Frequent job hopping may make you wonder whether it's worthwhile to take advantage of that employer-offered 401(k) account.

You can save for retirement with a 401(k) if you change jobs (and employers) often. But it can be tricky. Fortunately, you have several options when deciding what to do with your 401(k) when you leave your job and, by law, you have at least 30 days to make up your mind once you make the switch. Just be sure you understand the specifics, the challenges and all the available options for your retirement savings before you make a move.

Challenges of Saving With a 401(k) if You Change Jobs Often

A 401(k) is a retirement savings and investing plan that many private employers offer to their employees. Employee contributions are typically withdrawn automatically from employee paychecks—pretax—and invested.

Not counting your employer match, if available, you can contribute up to $20,500 this year to your 401(k) and make an additional catch-up contribution of $6,500 if the plan permits and you're over 50.

As a nest egg for retirement, you probably don't want to just leave that money behind when changing jobs. Deciding what to do with your 401(k) can be challenging, however, and you may face a few barriers.

  • You have minimal funds in your account. You might be required to transfer your money out if you have less than $5,000 in your former employer's 401(k) plan. And if you have less than $1,000 in that account, your former employer may just cut you a check to deposit into your new 401(k).
  • Your funds aren't fully vested yet. If your former employer matched funds in your 401(k) but you're not fully vested (meaning you don't own 100% of the funds your employer contributed), you may only get to keep a portion of the match when you quit your job—sometimes nothing at all.
  • Your new employer doesn't offer a 401(k) plan. If you change jobs and your new employer doesn't offer a 401(k) plan, you'll need to decide what to do instead.
  • There might be a waiting period. Sometimes new employees have a waiting period before they can contribute to a 401(k) plan or obtain their full employer match. In fact, 51% of 401(k) plans require a minimum of one year of employment before their matching contributions become fully available, according to Vanguard.

What to Do With Your 401(k) When You Change Jobs

In all the excitement of changing jobs, your 401(k) retirement savings may be the last thing on your mind, especially if you're young. But considering you may need about 80% of your annual preretirement salary each year you're retired to maintain your current standard of living, it's worth taking a look at options to secure both your 401(k) and your financial future.

Leave Your 401(k) Savings in Your Previous Employer's Plan

Sometimes the easiest option when you switch jobs is to leave your 401(k) with your previous employer. That's because you won't lose any contributions you've already made and your money will maintain its tax-deferred status until you withdraw it. Plus, if the plan has provided strong returns with low fees, leaving it alone can continue to pay off.

This may also be a good short-term option if your total 401(k) contributions are more than $5,000 and you're between jobs or laid off. However, in the long term, if you keep your existing 401(k) and your new employer offers you a separate 401(k) plan, you may end up paying fees on two plans.

Transfer Your 401(k) Savings Into Your New Employer's Plan

You may be able to transfer your existing 401(k) savings into your new retirement plan, but you may have to wait a bit. Some employers may require you to be on the job a certain number of days before you can enroll in a 401(k) plan.

On the upside, transferring your existing 401(k) can make it easier to track your investments because they are all in one place. You can typically have the plan administrator of your old plan deposit your 401(k) balance into a new retirement plan directly, making the process hands off for you. You'll pay no taxes and your money will continue to grow tax-deferred.

Alternatively, you may prefer an indirect rollover, where the balance is cashed out to you as a check. Keep in mind: If you choose an indirect rollover, you have 60 days to deposit the funds into another eligible retirement plan to avoid paying the mandatory penalty of 20% on the entire balance.

Roll Your 401(k) Savings Into an IRA

When changing jobs, you can also roll over your 401(k) to an IRA. You have a couple of different options, each with pros and cons and different tax implications. (More on that later.)

Should I Cash Out My 401(k) When I Change Jobs?

If you're changing jobs and need money, it can be tempting to cash out your 401(k) upon leaving. But before you do, it's best to understand the possible drawbacks. For example, the money you withdraw is taxable and at risk for a mandatory 20% federal withholding tax.

Plus, the money will be taxed as ordinary income and can no longer grow. You might also face an early withdrawal penalty of 10% if you're under the age of 59½. But maybe the scariest outcome of cashing out your 401(k) is that you could be short of cash when you really need it—at retirement.

Best Alternatives to Investing in a 401(k)

Employer-sponsored 401(k) plans are great options for anyone planning for retirement. But if your employer doesn't offer a plan or a 401(k) doesn't suit your needs, there are alternatives to consider.

Traditional or Roth IRA

Your retirement savings can be rolled over into an IRA—either a traditional IRA or a Roth IRA—that can offer you some advantages for your money.

Traditional IRA vs. Roth IRA
Traditional IRA Roth IRA
  • You have access to a wider range of investment options since you aren't limited by the plan your employer chooses.
  • You might save money on administration and management fees.
  • Your savings maintain their tax-deferred status and you typically won't pay taxes or early withdrawal penalties at the time of transfer.
  • It may be possible to consolidate several retirement accounts into a single IRA.
  • Your 401(k) earnings and contributions can be rolled over into your Roth IRA tax-free.
  • Any contributions you make going forward are also tax-free.
  • Like a traditional IRA, you can typically consolidate many retirement accounts into a Roth IRA.
  • You may have many more investment options to choose from than with an employer-sponsored 401(k).

Solo 401(k)

If you're the sole proprietor of a business or independent contractor with no employees, you may opt for a solo 401(k). Like a traditional 401(k), your contributions are tax-deductible and earnings are tax-deferred. You contribute as an employee or employer, but employer contributions are capped at 25% of your net income and cannot exceed $61,000 in 2022.

Any withdrawals you make are taxable, and you might pay a penalty if you withdraw funds before the age of 59½ unless you qualify for an exception. If you need cash early, you may be able to borrow limited funds without penalty if your plan allows.

SEP and Simple IRAs

Along with traditional and Roth IRAs, you might also explore a Simple or SEP IRA, which are great options for small business owners and the self-employed. Contributions are generally funded by your business and are tax-deductible if you're self-employed.

Although there's no option to make catch-up contributions after the age of 50, contribution limits are high. If you make a withdrawal in retirement, it will be taxed as ordinary income, but early withdrawals are subject to penalties unless you qualify for an exception.


Health savings accounts (HSAs) are set up to help you pay for medical expenses and are only available if you have a high-deductible health care plan. They are portable and can stay with you if you change employers or retire. HSA earnings are tax-deferred and contributions are tax-deductible.

You can withdraw money from your HSA at any time to use for medical expenses, but non-medical withdrawals may be subject to taxes and penalties. However, the HSA funds in your account carry over from one year to the next if you don't spend them, and might earn non-taxable interest.

The Bottom Line

If you change jobs often, saving for retirement with a 401(k) can be challenging, but not impossible. Retirement has a way of sneaking up on you and it pays to be prepared when the day comes. If your new employer doesn't offer a retirement plan, there are other ways to save. And while you're at it, stay up to speed on other aspects of your financial health by checking your credit report at Experian for free.