What does one do with their 401(k) when they leave their job? There was a fantastic article on CNN Money.com that explained all the different options and provided the material for this blog. There are several options to consider: cash it out, leave it in the 401(k), or roll it over to an IRA. Unless one wants to possibly face a 10% penalty and regular income taxes, the first option is probably the least favorable. Leaving the 401(k) in the original account is recommended if one is over age 55 and no longer working for the employer. This is one of the exceptions to the 10% early withdrawal penalty. If the account holder is planning on working in a short time, it would be easier to rollover the 401(k) into the next one. This is easier than rolling it into an IRA and then the new 401(k). The final reason to leave the 401(k) with the employer is if investment vehicle holding the account is just too good to be true. Rolling the 401(k) into an IRA or a Roth IRA is a common option. In order to avoid a 20% withholding penalty, the transfer must go directly into the new IRA. If the 401(k) is rolled into a Roth IRA, the account will face ordinary income taxes. Before the rollover takes place, it is important to note that the account loses ERISA protection, 10-year forward averaging, NUA, and pre-1974 capital gain treatment. A financial professional can help an employee make the appropriate decision when faced with a potential roll-over.