What to do with your 401(k) when changing jobs

Workplace retirement accounts are designed to be portable. But moving your 401(k) is more challenging than throwing your photos and favorite coffee mug into a box and grabbing your tablet on the way out the door.

If you’re changing jobs or have been laid off, chances are that your 401(k) account is the last thing on your mind. But it pays to include that money in your moving plans — even if you don’t deal with it right away.

If you’re leaving an employer, here’s what you need to know about moving your 401(k).

Take out a 401(k) loan? It’s due now

Did you borrow any money from your 401(k)? If you’re leaving the company, voluntarily or otherwise, it’s now due in full.

“I think that many people forget that if they have a loan outstanding, it has to be paid,” said Wayne Bogosian, president of the PFE Group and co-author of “The Complete Idiot’s Guide to 401(k) Plans.”

Fail to repay it and the loan amount will count as income, plus you’ll pay an additional penalty equal to 10% of the sum you borrowed if you’re younger than age 59½, he says. However, sometimes, especially in the case of layoffs, “employers will take it upon themselves to initiate a change in the plan to make available post-employment repayment,” says Bogosian.

Here’s how it works. You can keep making regular payments as an ex-employee. You haven’t heard about this feature from your former employer? “I would not be at all shy to ask,” said Bogosian. “There is nothing wrong with asking, ‘Can I pay back the loan post-employment?’ Plans can be amended to do this.”

IRA rollover isn’t your only option

When you leave your employer, you have several options with your

401(k):

Leave the account where it is.

Move the money to your new company’s plan.

Roll it into a traditional or Roth IRA.

Take a lump-sum distribution (cash it out).

“Do your own homework,” said Bogosian. “This is one area where generalizing can get you into trouble.”

Too many times, advisers “don’t know what they don’t know,” said Ed Slott, an IRA expert and author of “The Retirement Savings Time Bomb and How to Defuse It.” Get several opinions along with your own research.

You may be able to leave your 401(k) alone for a bit

Chances are, you probably don’t have to move that money right away. If your balance is $5,000 or more, you can leave the money right where it is, Bogosian says. But be careful if it’s less than that: The company could cash it out and send you a check or roll your balance over to an IRA, he says. Check the rules and, where possible, “don’t do anything for the first six months.”

On your first day at the new job, sign up for the company 401(k) plan, even if your new employer has an automatic opt-in, says Bogosian.

With many company plans, automatic opt-in doesn’t kick in for one to three months. So if you rely on that, rather than taking the initiative, you can miss 30 to 90 days of contributions and matching funds, he says.

After six months, you’ve got a handle on the job, know you’re going to stay and have had experience with your new plan. So you’re now in a strong position to compare your last 401(k) plan with this new one, including the diversity of the investments and the costs.