What Is Your Old 401(k) Up To?

The balance on your old 401(k) probably looks fine. It's higher than last year, because most things are. What that number doesn't show is that the account changed the day you walked out, and no notice arrives to say so.

A 2026 Fidelity study found 23% of workers carry balances in more than one employer plan. That is what happens when a career runs through six employers. Most of those accounts are sitting exactly where they were left. Not because anyone decided that was best, but because leaving it alone never felt like a decision at all.

Three things changed the day you left

Someone started paying for the account, and it may be you. Plenty of companies pay the admin costs of the plan while you work there. Once you are off the payroll, those charges often shift onto your balance instead.

You can't borrow from it anymore. Most plans allow loans and hardship withdrawals only while you work there. If you were counting on that money in a pinch, it is not there.

Nothing new goes in. Nothing goes in, there is no match, and that holds however well the fund does.

If the balance is small, it might not stay put

Under IRS rules, a former employer isn't obliged to keep you in the plan once your vested balance drops to $7,000 or less.

Between $1,000 and $7,000, they can move it into a default safe-harbor IRA chosen for you, where it typically lands in a low-yield money market fund and sits there barely keeping pace with inflation.

Under $1,000, they can simply mail you a check. That's a distribution, with 20% withheld for federal tax, and if you're under 59½ and don't get it into another retirement account within 60 days, a 10% early withdrawal penalty lands at tax time on top.

The one that shows up twenty years later

The part worth knowing early arrives at RMD age, currently 73. From then on, the rules for 401(k)s and IRAs are not the same at all.

With IRAs, you can add up what you owe across all of them and take the whole amount from whichever one you like. With 401(k)s, each account has to be worked out on its own and drawn from on its own. Four old plans means four calculations, every year, forever.

Miss one and the IRS charges a 25% excise tax on the shortfall, reduced to 10% if you catch it within two years. That is an expensive filing error, and the people most likely to make it are the ones who forgot an account existed.

Sometimes leaving it really is right

Three situations where the old plan genuinely wins:

• Institutional pricing. Large corporate plans often access share classes cheaper than anything you can buy retail in an IRA.
• Creditor protection. ERISA gives 401(k) assets strong federal protection against lawsuits and bankruptcy. IRA protection is weaker and varies by state.
• The Rule of 55. Leave a job in or after the year you turn 55 and you can withdraw from that specific 401(k) penalty-free before 59½. Roll it into an IRA and that option disappears.

Four options, plainly

1. Leave it, on purpose, and look at it once a year. Right when the pricing or protections above apply to you.
2. Roll it into your current employer's plan. One account to watch, ERISA protection intact, and the RMD problem above solved.
3. Roll it into an IRA. The widest investment menu, index funds and ETFs included, and IRA aggregation makes future RMDs far simpler.
4. Move a portion into an annuity. This protects that slice from a market downturn and turns it into income you can't outlive, while the rest stays invested for growth. Not the right home for an entire balance, but a solid floor underneath the rest of the plan.

Ten minutes, not a project

Log in. See what it's invested in, whether the fees moved to you, and whether the balance is anywhere near those cash-out thresholds. Then pick one of the four on purpose. If a friend has changed jobs a few times, forward this along, because the RMD trap is one people find out about far too late.

If you'd like a second set of eyes on where an old 401(k) stands, and whether an annuity belongs in the mix, reach out and I'll walk through it with you.