After you leave your job, there are several options for your 401(k). Depending on how much you saved, you may be able to leave your account where it is. Alternatively, you may roll over an old 401(k) into a new account with your new employer; begin taking distributions; cash it out entirely; or roll it into an IRA.

If you have more than $5,000 invested in your 401(k), most plans allow you to leave it where it is after you separate from your employer. If you have a substantial amount saved, and you like your plan portfolio, leaving your 401(k) with a previous employer may be a good idea. If you are likely to forget about the account or are not particularly impressed with the plan's investment options or fees, however, then consider some of your other options.

If you've switched jobs, see if your new employer offers a 401(k) and when you may be eligible to participate. Many employers require new employees to put in a certain number of months of service before they can enroll in a retirement savings plan.

Once you are enrolled in a plan with your new employer, it's simple to roll over your old 401(k). You can elect to have the administrator of the old plan deposit the contents of your account directly into the new plan by simply filling out some paperwork. Alternatively, you can elect to have the balance of your old account distributed to you in the form of a check. However, you must deposit the funds into your new 401(k) within 60 days to avoid paying income tax on the distribution. Make sure that your new 401(k) account is active and ready to receive contributions before you liquidate your old account.

Of course, you may decide you'd rather just take the cash and run. While there is nothing stopping you from liquidating an old 401(k) and taking a lump-sum distribution, most financial advisors would caution strongly against this option. This reduces your retirement savings unnecessarily, and you will have to include the distribution in your yearly income taxes. If you have a large sum in an old account, the tax burden of a full withdrawal may not be worth the windfall.

You can begin taking qualified distributions from any 401(k), old or new, after age 59.5. If you separate from your employer due to retirement, it might be the right time to start drawing on your savings for your monthly income.

If you have a traditional 401(k), you must pay income tax at your ordinary rate on any distributions you take. If you have a designated Roth account, any distributions you take after age 59.5 are tax-free as long as you have held the account for at least five years. If you do not meet the five-year requirement, only the earnings portion of your distributions is subject to taxation.

If you retire before age 55 or switch jobs before age 59.5, you may still take distributions from your 401(k). However, you will be required to pay a 10% penalty tax, in addition to income tax, on the taxable portion of your distribution, which may be all of it. The 10% penalty does not apply to those who retire after age 55 but before age 59.5.

Once you reach age 70.5, you are required to begin taking distributions from your 401(k) if you are no longer working. Your required minimum distribution (RMD) is dictated by your expected life span and your account balance. Consult your plan administrator to find out how much you are required to withdraw each year.

If you retire or move to an employer that does not offer a retirement plan, but you do not wish to leave your 401(k) with your old employer, you can elect to roll the account over into an IRA. The rollover process is the same as for a new 401(k); you can either have the plan administrator do it directly or take a full distribution and deposit it into an IRA within 60 days.

Rolling your old 401(k) into an IRA may be your best bet unless the investment options offered by your old plan are particularly enticing. However, traditional IRAs require RMDs at age 70.5 regardless of whether or not you are still employed. Roth IRAs generally do not carry this requirement.