401(K) Employer Contributions: Keep Or Lose?

When you leave your job, you can keep your 401(k) account with your former employer indefinitely, if they allow it. However, you won't be able to contribute additional money to the account, though you can continue to manage your investments. You are entitled to your deferrals, plus any investment gains (or minus losses) on your deferrals.

Employer contributions are vested and not forfeited

Employee salary deferrals are immediately 100 percent vested, meaning that the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, they are entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals. In SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule.

When you leave your job, you can keep your retirement savings in their plan after you leave. While your earnings will still grow tax-deferred, you won’t be able to contribute additional money to the account, though you can continue to manage your investments. If you do decide to leave your money in your former employer’s plan, keep up with its performance and check that how it’s invested continues to align with your goals. Make sure to verify if your plan requires a distribution at some point in the future.

Move the money into an IRA and roll over the money in your 401(k) or 403(b) into it. This may have more investment choices than your employer’s plan allowed and let you continue contributing to your retirement account provided you have earned income. Move your money into a new employer’s plan.

Employers permit a departing employee to keep a 401(k) account indefinitely in their old plan, though the employee can’t contribute further. This generally applies to accounts worth at least $5,000.

Lazaroff, who hosts the investment education podcast The Long Term Investor, says that you should take advantage of your employer’s matching contributions if you can. It’s a risk-free way to grow your money and not leave part of your compensation on the table. “Meeting the match doesn’t necessarily mean you have to sacrifice other financial goals, such as paying down debt or establishing an emergency fund”, he says. “You can still chip away at debt and put away small amounts in an emergency fund if necessary. But securing that employer match is crucial."

Employee salary deferrals are immediately vested

Employee salary deferrals are immediately 100 percent vested, meaning that the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, they are entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals.

In SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule.

When you contribute to your 401(k) account, your money is invested according to your choices from the options your employer offers. Lazaroff, who hosts the investment education podcast The Long Term Investor, says that you should take advantage of your employer’s matching contributions if you can. It’s a risk-free way to grow your money and not leave part of your compensation on the table.

When you leave your job, you can keep your retirement savings in their plan after you leave. While your earnings will still grow tax-deferred, you won’t be able to contribute additional money to the account, though you can continue to manage your investments. If you do decide to leave your money in your former employer’s plan, keep up with its performance and check that how it’s invested continues to align with your goals. Make sure to verify if your plan requires a distribution at some point in the future. Move the money into an IRA.

In many cases, employers permit a departing employee to keep a 401(k) account indefinitely in their old plan, though the employee can’t contribute further. This generally applies to accounts worth at least $5,000.

Employer matching contributions are risk-free

Employers permit a departing employee to keep a 401(k) account indefinitely in their old plan, though the employee can’t contribute further. This generally applies to accounts worth at least $5,000. When you contribute to your 401(k) account, your money is invested according to your choices from the options your employer offers. You can still chip away at debt and put away small amounts in an emergency fund if necessary.

If you do decide to leave your money in your former employer’s plan, keep up with its performance and check that how it’s invested continues to align with your goals. Make sure to verify if your plan requires a distribution at some point in the future. Move the money into an IRA.

Investment gains are entitled to departing employees

When an employee leaves their job, they are entitled to keep their 401(k) account with their former employer if the plan sponsor allows it. The employee can keep their retirement savings in the plan after they leave, although they can't contribute further to the account. This generally applies to accounts worth at least $5,000.

The employee's salary deferrals are immediately 100% vested, meaning that the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, they are entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals.

If the employee decides to leave their money in their former employer’s plan, they should keep up with its performance and check that how it’s invested continues to align with their goals. They should also verify if their plan requires a distribution at some point in the future.

The employee can also open an IRA and move, or roll over, the money in their 401(k) or 403(b) into it. This may have more investment choices than their employer’s plan allowed and let them continue contributing to their retirement account provided they have earned income.

If the employee decides to move their money into a new employer’s plan, they should take advantage of their employer’s matching contributions if they can. It’s a risk-free way to grow their money and not leave part of their compensation on the table.

401(k) accounts can be kept indefinitely

In many cases, employers permit a departing employee to keep a 401(k) account indefinitely in their old plan, though the employee can’t contribute further. This generally applies to accounts worth at least $5,000.

Employee salary deferrals are immediately 100 percent vested - that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals. In SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule.

Frequently asked questions