Changing Jobs in 2026? Don’t Leave Your 401(k) Behind

If you are planning to switch jobs in 2026, you aren't alone. On average, most workers now stay at a job for about 3.9 years.

While a new job often means a better salary, it also comes with a long "to-do" list. One of the most important—but often overlooked—tasks on that list is deciding what to do with your old 401(k) retirement account.

Moving your retirement money incorrectly can lead to expensive tax bills and penalties. Here is what you need to know to protect your savings.
 

The Danger of "Forgotten" Money

It is surprisingly easy to leave a 401(k) behind and forget about it. According to recent reports, there are over 31 million "forgotten" 401(k) accounts in America, holding a staggering $2.1 trillion.

When you leave a job, you may lose access to your online portal or simply lose track of the paperwork. Being proactive and moving that money to your new employer or a personal account ensures you stay in control of your future.
 

The Risks of Cashing Out

When changing jobs, some people choose to "cash out" their 401(k), thinking they will just deposit the check into their new account later. This is often a mistake for two reasons:
 

• The 60-Day Rule: Once you receive that check, you only have 60 days to put it into a new retirement account. If you miss that deadline, the IRS considers that money "income."
• Taxes and Penalties: If you aren't at least 59½ years old, cashing out will likely trigger a 10% early withdrawal penalty. Additionally, the money will be taxed, which could push you into a higher tax bracket, leaving you with much less than you started with.
• Better Options: Rollovers

To avoid taxes and penalties, you generally have two "rollover" options:
 

• Move it to your new job: You can transfer the money directly from your old employer's plan to your new company’s 401(k) plan.
• Move it to an IRA: You can move the money into an Individual Retirement Account (IRA) at a bank or brokerage of your choice.

The safest way to do this is a direct transfer, where the money moves from one financial institution to the other without you ever touching the check.
 

What is Changing in 2026?

The rules for retirement accounts are shifting. By 2026, several key changes will be in effect:
 

1. New Tax Rules: There are new regulations on how "catch-up contributions" (extra savings allowed for older workers) are taxed.
2. Investment Options: Recent policy changes may allow for different types of investments within 401(k) plans.
3. Required Distributions: Rules regarding when you must start taking money out of your accounts (RMDs) have been updated.

 

Don’t Be Afraid to Ask for Help

Financial paperwork is confusing. In fact, a government report found that 40% of workers struggle to understand the fees associated with their 401(k).

Because the stakes are high, it is a good idea to talk to a financial planner or an accountant.

While they may charge a fee, their advice can save you thousands of dollars in taxes and help ensure your retirement savings continue to grow for years to come.

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