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When you leave a job, you generally have four options for your 401(k): leave it with your former employer, roll it over to a new employer’s plan, roll it into an IRA, or cash it out. Rolling funds over to a new plan or IRA is usually the best financial strategy, as it preserves tax-deferred growth and avoids penalties. Keeping it with your former employer is a viable option if you like the investment choices, but managing multiple accounts can be cumbersome. Cashing out is the worst choice; it triggers immediate income taxes plus a 10% early withdrawal penalty if you are under age 59½, significantly reducing your retirement savings.
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