Leave it with your former employerPeople often think that since they are no longer an employee, they must immediately move the funds out of their employer sponsored 401(k) plan when they leave. If you're not sure what to with your 401(k) plan on your last day on the job, don't panic. Many employers sponsor plans that will allow you to keep your money in your plan until you're ready to move it out. So unless you've been extremely unhappy with the management of your 401(k) plan over the years, or if your account value is low enough that the former employer has the option to require you to move it out (currently less than $5,000), don't rush yourself. If you have questions or concerns, consult a qualified financial planner.
Roll it over
Another option is to roll over your entire 401(k) directly into an Individual Retirement Account (IRA). However, keep in mind that you need to move over the funds by way of the, "rollover". Within the retirement industry, this term refers to a transfer where your money is moved non-reported between retirement savings accounts of different types. It's a process whereby the money in your 401(k) transfers directly into your new IRA, bypassing you all together. In other words, you never actually take possession of the money in your 401(k), saving that money from being taxed at that time.
For more information on 401(k) plans as well as other retirement plans, visit the Protective Learning Center.