I left my job. What happens to my savings?

Read time: 5 to 6 minutes

Switching jobs? It happens a lot. In fact, the average worker changes employers about once every 4 years.¹ If you’re starting a new job, consider this important but sometimes overlooked question: What should you do with the money in your former employer’s retirement plan? Let’s go over the options you may have and some pros and cons of each.

Stay in your plan

If you have a certain amount of money in your account—typically at least $5,000 or $7,000, depending on plan rules—you can usually leave your money in your former employer's plan at Vanguard. If you're happy with your plan, you may want to stay.

Pros and Cons Table

Pros	Cons
You can keep your investment selections. The plan may offer low-cost investment options and services not available elsewhere. You won't pay taxes on your money until you take a distribution or withdrawal.² Your plan may offer you the flexibility to take partial distributions or installment payments. If you have a plan loan, you can use electronic bank transfers to continue making payments, if your plan allows.³ Your plan is covered by creditor protection laws, including bankruptcy. You may take advantage of beneficial tax rules if you hold company stock.	You can't continue contributing to the plan. You usually need at least $5,000 or $7,000 in your account, depending on plan rules. Your withdrawal options may be limited, depending on what the plan offers. Once you reach age 73, you'll need to begin taking required minimum distributions (RMDs). Note: Roth money is not subject to RMDs.

Pros

Cons

You can keep your investment selections.
The plan may offer low-cost investment options and services not available elsewhere.
You won't pay taxes on your money until you take a distribution or withdrawal.²
Your plan may offer you the flexibility to take partial distributions or installment payments.
If you have a plan loan, you can use electronic bank transfers to continue making payments, if your plan allows.³

Your plan is covered by creditor protection laws, including bankruptcy.
You may take advantage of beneficial tax rules if you hold company stock.

You can't continue contributing to the plan.
You usually need at least $5,000 or $7,000 in your account, depending on plan rules.
Your withdrawal options may be limited, depending on what the plan offers.
Once you reach age 73, you'll need to begin taking required minimum distributions (RMDs). Note: Roth money is not subject to RMDs.

Stay in the plan

Looking for more help?

Your plan may offer advice and money management services.

Depending on the service, you can get a little guidance or ongoing professional money management of your retirement plan investments. Keeping your money in your previous employer's plan could allow you to take advantage of this powerful benefit.

Check if your plan offers advice

Roll over to an IRA

An IRA is a personal, tax-deferred account that gives investors an easy way to save for retirement. You can move your money to an IRA, which offers a wide assortment of investment options.⁴

If you're interested in this option, consider a Vanguard IRA®. Why? The average Vanguard fund expense ratio is 84% less than the industry average.⁵ Over time, that can mean more money in your account—whether you leave your money in the plan or roll it over to a Vanguard IRA.

Pros and Cons Table

Pros	Cons
IRAs typically offer more investment choices and fewer restrictions than employer-sponsored plans. You'll have access to Vanguard's advice services to manage your investments—even if advice wasn't available in your previous employer's plan. You won't pay taxes on your money until you take a distribution or withdrawal.² You may have more flexibility to use the money for a first-time home purchase or education expenses. You can choose between a traditional or a Roth IRA, depending on when you want your tax break.	An employer plan may offer investments at lower costs than those in IRAs, depending on your investment choices. Your costs may vary based on your mix of investments. Once you reach age 73, you'll need to begin taking RMDs from a traditional IRA. Note: Roth money is not subject to RMDs. You may lose access to plan-specific benefits such as creditor protection, loan repayments, or installments.

Pros

Cons

IRAs typically offer more investment choices and fewer restrictions than employer-sponsored plans.
You'll have access to Vanguard's advice services to manage your investments—even if advice wasn't available in your previous employer's plan.
You won't pay taxes on your money until you take a distribution or withdrawal.²
You may have more flexibility to use the money for a first-time home purchase or education expenses.
You can choose between a traditional or a Roth IRA, depending on when you want your tax break.

An employer plan may offer investments at lower costs than those in IRAs, depending on your investment choices. Your costs may vary based on your mix of investments.
Once you reach age 73, you'll need to begin taking RMDs from a traditional IRA. Note: Roth money is not subject to RMDs.

You may lose access to plan-specific benefits such as creditor protection, loan repayments, or installments.

Questions about IRAs?

Call us at 888-387-5534.

You can consider a traditional or Roth IRA, depending on your situation and when you want your tax break—now or later. You can also explore whether a Roth conversion might make sense for you.

Learn about traditional vs Roth IRAs, conversions, and more

Helpful hint

If you invest in a company stock fund in your plan, please consult a tax advisor for more information on the tax treatment of company stock.

Roll over to an IRA

Roll over to a new employer's plan

If your new employer's plan accepts rollovers, you can bring the balance over from your old employer's plan.

Pros and Cons Table

Pros	Cons
All your retirement plan savings will be in one place. You won't pay taxes on the money until you take a distribution or withdrawal.² You may have access to investment options or services that your previous employer's plan didn't offer. Your plan is covered by creditor protection laws, including bankruptcy.	The cost of your investment options may be higher, depending on the plan. Your investment options may change based on what your new plan offers. You may not have access to the same services as in your previous employer's plan, such as advice. You may lose access to plan-specific benefits such as loan repayments, installments, and advice. If you're no longer employed by this company when you reach age 73, you'll need to begin taking RMDs. Note: Roth money is not subject to RMDs.

Pros

Cons

All your retirement plan savings will be in one place.
You won't pay taxes on the money until you take a distribution or withdrawal.²
You may have access to investment options or services that your previous employer's plan didn't offer.

Your plan is covered by creditor protection laws, including bankruptcy.

The cost of your investment options may be higher, depending on the plan.
Your investment options may change based on what your new plan offers.
You may not have access to the same services as in your previous employer's plan, such as advice.
You may lose access to plan-specific benefits such as loan repayments, installments, and advice.
If you're no longer employed by this company when you reach age 73, you'll need to begin taking RMDs. Note: Roth money is not subject to RMDs.

Roll over to a new plan

Cash out your savings

You can cash out your entire retirement plan balance when you leave an employer. But that could have a major impact on your savings—and your retirement readiness. And you could owe a lot of money to the IRS. Add up all the taxes and penalties, and it could mean years of progress wiped out in a single day. So carefully consider this option before you act.

Pros and Cons Table

Pros	Cons
The money is yours to use now as you like. You can use the money for emergency expenses or to help you pay off debt.	The federal government withholds 20% toward your taxes before you get your check. If you cash out before you reach age 59½, you will owe a 10% federal penalty tax on the money. (Some exemptions may apply.) Cashing out your savings means your money will no longer be invested, so it won't be able to grow.

Pros

Cons

The money is yours to use now as you like.
You can use the money for emergency expenses or to help you pay off debt.

The federal government withholds 20% toward your taxes before you get your check.
If you cash out before you reach age 59½, you will owe a 10% federal penalty tax on the money. (Some exemptions may apply.)
Cashing out your savings means your money will no longer be invested, so it won't be able to grow.

Helpful Hint

Take time to weigh your withdrawal options. You may want to talk them over with a financial advisor.

Cash out my savings

It's time to make a decision

See what makes sense for you. When you’re ready, we’re here to help.

I want to explore my options

¹ Source: U.S. Department of Labor, Bureau of Labor Statistics. Employee Tenure in 2022. 2022.

² Taxes: Taking money from your retirement account can affect how much you'll have to pay in taxes. You'll owe taxes on pre-tax money. You won't owe taxes on Roth earnings as long as you are age 59½ or older and it's been at least five years since your first Roth contribution. If required by law, Vanguard will withhold some taxes for you. You may need to pay a 10% federal penalty tax if you take money out early.

³ If you have a loan and leave your employer, you can pay back the loan in full or continue making payments using electronic bank transfers. But if you don't choose either of these options, the unpaid balance will be reported to the IRS as a withdrawal. That amount may then be subject to income tax. And if you're younger than age 59½, you may also owe a 10% federal penalty tax.

⁴ Whether you keep your money where it is, move it to an IRA, or move it to another employer's plan depends on your situation and preferences. Some things to consider are available investments and services, fees and expenses, and protection from creditors. Also consider withdrawal penalties, required distributions, and the tax effects of moving company stock to an IRA. There are other factors too. Weigh the pros and cons before you make your decision.

⁵ Vanguard average mutual fund expense ratio: 0.07%. Industry average mutual fund expense ratio: 0.44%. All averages are asset weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2024.

Whenever you invest, there's a chance you could lose the money.

Before you invest, get the details. Consider the fund's objective, risks, charges, and expenses. The fund's prospectus (or summary prospectus, if available) will tell you these important facts and more. So read it carefully. Call Vanguard at 800-523-1188 to get one. Or you can find one at vanguard.com.

The performance of a company stock fund depends on the price of a single stock, which can move up or down dramatically. So this type of fund can be riskier than a stock mutual fund, which may own hundreds or thousands of stocks.

Vanguard does not provide individual tax advice. You should consult your tax advisor before making any decisions as to your specific circumstances.

Advisory services are provided by Vanguard Advisers, Inc. (VAI), a registered investment advisor. Eligibility restrictions may apply. VAI cannot guarantee a profit or prevent a loss.