“Forgotten 401(k) accounts have surged to a record $2.1 trillion in assets,” according to InvestmentNews.

That’s about $1 out of every $4 in 401(k) accounts.

In fact, they say there are “nearly 32 million accounts left behind.”

I don’t know about you, but I don’t want to forget or leave behind retirement savings that is rightfully mine!

And yet, it happens!

Change jobs a few times, and it’s surprisingly easy to leave a trail of old 401(k) accounts behind you.

Maybe there’s one from your last employer. Another from a job ten years ago. Maybe you’re not even sure where all of them are anymore.

The good news is that when you leave an employer, you generally have a few options for what to do with the money in your retirement plan.

Here are four worth understanding.

Option 1: Cash It Out

The money in your 401(k) is yours, so taking the cash may seem like the simplest option.

But it can also come with significant tax consequences.

If you take a distribution, you can expect that to count as taxable income. Which means you may owe ordinary income taxes on the withdrawal. Depending on your other income for the year, it could also be at a higher marginal tax rate than you’re used to paying.

But it could get even more expensive. If you take this distribution before age 59½, you could owe an additional 10% penalty, depending on your circumstances.

Even after 59½, the tax hit alone can be quite painful, especially if you don’t plan for it.

Before cashing out an old retirement account, it’s important to run the numbers — and understand what the decision could cost you.

Option 2: Leave It with Your Former Employer

In some cases, you may be able to simply leave the account where it is.

There can be reasons to do this. For example, certain people who leave an employer during or after the year they turn 55 may qualify to access that employer’s plan without the typical 10% early-distribution tax.

It’s also still your money, so even if you leave it in the previous employers’ plan, it can still provide a vehicle to help you work towards your savings and investment goals.

But leaving accounts behind can also make your finances harder to manage.

Your former employer may change investment choices or plan providers. Smaller balances may sometimes have to be moved. And after several job changes, you could find yourself keeping track of retirement money in several different places.

This adds unnecessary complexity, could make managing your investments less efficient, and could contribute to your account being “forgotten.”

Option 3: Move It to Your New Employer’s Plan

If your new employer allows incoming rollovers, you may be able to transfer your old 401(k) into your new workplace retirement plan.

This can simplify things by putting more of your retirement savings in one place.

Whether it makes sense depends on the new plan — including its investment choices, expenses, features, and your broader financial situation.

Option 4: Roll It Into an IRA

Another option is a rollover to an Individual Retirement Account, or IRA.

A properly structured rollover transaction can allow you to move retirement assets while maintaining their tax-deferred or Roth tax treatment, as applicable.

An IRA may also give you more control over where the account is held and how the money is invested.

And if you’ve accumulated retirement accounts from several former employers, rolling them into one or two accounts can potentially make your financial life much easier to see and manage.

Simpler Can Be Better

There isn’t one answer that works for everyone.

But there is a benefit to knowing where your retirement money is and understanding how all the pieces fit together.

When your retirement savings are scattered across multiple accounts and multiple financial institutions, it can become harder to evaluate your investments, understand your overall asset allocation, and keep track of what you own.

If you have an old 401(k), start by finding out exactly where the account is, how much is in it, and what options are available to you.

Your Asset Strategies financial advisor can help you understand your options and make an informed decision that fits into your total financial plan.

And if applicable, we can help you properly manage the transaction to keep the same tax treatment — we wouldn’t want you to trigger any nasty tax surprises or penalties!

Either way, the most important part is to ensure you’re deciding what to do with your old 401(k) based on a full understanding of your options available and the pros and cons of each.

This article was written for financial advisory clients of Asset Strategies. If you’re not yet a client and you’d like to speak with a financial advisor about your old 401(k)s and your other financial goals, request a Welcome Call with an Asset Strategies financial advisor here.