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 nobody sent a notice about it.

Fidelity's 2026 study found 23% of workers are carrying multiple balances across old and current employer plans, which 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 cover recordkeeping and administrative costs for current employees. Once you're off the payroll, those charges commonly shift onto your balance instead.

You can't borrow from it anymore. Most plans limit loans and hardship withdrawals to current employees. If you were mentally counting that money as emergency access, it isn't.

Nothing new goes in. No contributions, no match, no matter how well the fund performs.

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

This is the part almost nobody sees coming. Once you reach RMD age, currently 73, the rules treat 401(k)s and IRAs completely differently.

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 With 401(k)s, every single account has to be calculated separately and withdrawn from separately. 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 a genuinely 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 in particular 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.