In fact, Lewis says that he recently met with a young married couple who each had multiple old 401(k)s, with roughly $3,000, $7,000, $8,000 and $9,000 in them respectively. Rather than figuring out a way to consolidate those accounts, the couple instead decided to cash them out. "They said that they didn't think it was a lot of money," Lewis says. "I said, 'That's $30,000, buddy.'" Steven B. Goldstein, vice president and private CFO at oXYgen, says the chance to have immediate money on hand can unfortunately be too tempting for some people in their 30s to pass up. "For people in this age group there are other cash-flow needs -- maybe they recently bought a home or just had kids and they are cash-flow strapped," Goldstein says. "They see this as a source of money if they cash
Walsh gives four different approaches people can take with their old accounts: leave them in place, roll them over into a current company's 401(k), roll them into an IRA or take a distribution in cash. The last option is strongly discouraged by Fidelity, Walsh notes, because of the tax hit and potential withdrawal penalties.
Catherine Golladay, vice president of 401(k) participant services at Schwab Retirement Plan Services, adds that a Rollover IRA gives people more ways to access and receive distributions whenever they eventually retire. "Whichever option you choose, the most important thing is to keep your money invested and working for your retirement," Golladay says. "It may be tempting to take the money and run when you change jobs, especially if you could use the cash, but then you wouldn't be using it for what it was originally intended -- retirement." Meanwhile, oXYgen Financial's Lewis offers a scenario where keeping money in a 401(k), instead of a self-directed IRA, could make sense: If a person wants to start a business, he or she can borrow money out of the 401(k) as capital to help fund their venture -- which could be especially helpful at a time when bank loans are much harder to secure. Lewis says that in his 20 years in the financial services industry it has never been easier to move money out of an old 401(k) than it is today. At the larger 401(k) providers, it could be as simple as making one phone call.