Retirement Retirement Planning

Changing Jobs in 2026? What You Do With Your 401(k) Matters More Than You Think

And one mistake could cost you thousands.

By Catherine Collins

Edited by Laura Hohenstein

Updated Feb. 6, 2026

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If you're changing jobs in 2026, it can take time to get used to your new role. One important part of transitioning jobs is moving your old 401(k) retirement plan from your old employer to a new account. Sometimes, employees forget to do this or rush the process in a way that can lead to mistakes.

Here are a few reasons why making 401(k) mistakes can lead to an expensive tax bill, as well as a few tips to make sure you transition your account seamlessly.

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Job changes are common

A generation or two ago, it was the norm for people to stay with one company for the duration of their careers. Now, changing jobs is more common. According to recent data from the Bureau of Labor Statistics, the average that most people stay at jobs is 3.9 years. While changing jobs has its benefits, namely with negotiating salary increases, it also comes with challenges. One of those challenges is managing paperwork, onboarding, and properly transferring your 401(k).

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Don't rush 401(k) decisions

Changing jobs is a time-intensive process. It takes several weeks to wrap up your current job and then be onboarded at your next job. It's likely that many of your benefits will change, like health insurance and dental insurance. Your paycheck may change. Your 401(k) plan can change providers, too. Moving your 401(k) from your old job to another account is just one step on a long checklist. However, it's not a step you should rush, as making a mistake when transferring your 401(k) can lead to unexpected tax bills.

Leaving 401(k)s behind

Many employees leave their 401(k)s behind with their old employers or take time to decide what to do with their accounts. However, the risk with that is losing access to your account or even forgetting that you have the account. It can be hard to imagine forgetting about money you've invested, but it happens. In fact, according to a recent report from Capitalize, there are 31.9 million forgotten 401(k) plans in America totaling $2.1 trillion in assets. Sometimes people forget about the accounts, sometimes they plan to transfer them later but don't, and sometimes people lose access to the accounts. There are ways to get access again to accounts, but it's better to be proactive and move your 401(k) accounts when you change jobs.

Rolling over 401(k)s

Another option many employees choose is rolling over 401(k)s into an IRA. An IRA is another type of retirement account that you keep in your own brokerage account. You can still open a 401(k) with your new employer. The goal of a rollover is to avoid the penalties that come if you cash out your 401(k) before you're age 59 and a half. According to the IRS, there is a one-rollover-per-year rule, so if you switch jobs again, keep this in mind.

The consequences of cashing out

Many employees make the mistake of cashing out their 401(k) when changing jobs. The idea is to take the check and then deposit it into a new account at their new job. However, if you do this, there may be some unintended consequences. First, you have 60 days to deposit the money into a new account. If you're not aware of this rule or miss the deadline, your lump-sum payment will count as income. That can change your tax bracket and trigger an early withdrawal penalty. For that reason, it's best to have your old 401(k) provider send your new 401(k) provider your funds directly. Another option is to roll your 401(k) directly into an IRA, as mentioned previously.

Important 2026 401(k) changes

It's also important to be aware of several key 401(k) changes for 2026. There have been changes in the ways catch-up contributions are taxed. President Trump issued an executive order about allowing alternative investments in 401(k)s. There are new required minimum distribution (RMD) rules. All of these new rules and potential future new policies can affect the way that you manage your 401(k) and the choices you make when deciding where to move your 401(k) and what type of account to put it in.

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Where to find professional help

Getting professional help by consulting a financial planner or an accountant might cost you, but it can also save you thousands of dollars if they help you avoid an expensive 401(k) mistake. It's common for employees to find 401(k) paperwork challenging. In fact, a Government Accountability Office report found that 40% of workers find it hard to understand their 401(k) fees. In other words, there's no shame in getting help for something as important as transferring your 401(k). It can bring great peace of mind and save you money.

Bottom line

If you're changing jobs in 2026, it's important to take your time when moving your 401(k). The goal of investing in a 401(k), after all, is to ensure you can have a stress-free retirement one day. Making a mistake when moving your 401(k) can, unfortunately, lead to unwanted fees and an expensive tax bill. That cuts into your retirement returns and can negatively impact your month-to-month cash flow. To avoid that, make sure to ask a qualified financial planner or accountant for help to ensure you follow the steps correctly when sending your current 401(k) directly to your new job or rolling it into an IRA.

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