Cramer on Retirement: What to Do With Old 401(k)s

(Editor's note: This is the fourth in a series of columns on retirement by Jim Cramer, founder of TheStreet , and Wally Konrad, former senior editor for Smart Money magazine. To read the first installment, click here. The second article is here, and the third is here)

NEW YORK ( TheStreet) -- If you're leaving a job, or worse, suddenly laid off, the last thing on your mind is your retirement account. You mean to get around to rolling your money over into an IRA, but the world has turned upside down and you're faced with more urgent priorities such as beginning a painful job search or grabbing the best retirement options.

No wonder 32% of workers leave their retirement savings in their former employers' 401(k) plans. Employers love it when you do nothing. The more assets a plan has, including money from former employees and retirees, the easier it is for sponsors to negotiate with plan providers for better terms and lower fees.

But that's no reason to let them keep your money hostage.

Here are just a few reasons why you should take charge and roll that money over today:

Better investments

"With your 401(k) your investments are limited to whatever the plan offers," says Judith Ward, a certified financial planner with T. Rowe Price. "With an IRA you can have an account anywhere and you've got whatever investment choices you want."

More choices means you can more effectively diversify your retirement savings and offset the choices in your current employer's plan by using individual stocks or investments in asset classes such as real estate, commodities or energy that aren't always available in company retirement plans.

Plus, you'll be able to invest in high-growth stocks such as Walt Disney ( DIS) and McDonald's ( MCD), two holdings in my Action Alert PLUS portfolio that promise better returns than the plain vanilla mutual funds most 401(k)s offer.

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Flexibility

With an IRA you may withdraw money whenever you want to. If it is before you reach age 59 1/2 you may have to pay taxes and/or penalties but you can still get to your money. Employer retirement plans are trickier, says Ward. Often the only way to get cash is to take a loan against your 401(k) or prove you qualify for a hardship withdrawal, she explains.

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