• What happens to your 401k if you quit or lose your job?

When you change jobs, you have a number of options for your 401(k):

• Roll it over into another qualified retirement plan, such as your new employer's 401(k) plan or an IRA, called a Rollover (or Conduit) IRA. By doing this, you save yourself from any penalty or withholding taxes.
  To make absolutely sure that you're making a direct rollover, be careful that your former 401(k) plan's trustee makes the check directly payable to your IRA's custodian or to your new 401(k) plan's trustee-not to you. Otherwise, you'll be taxed as if you were completely cashing out.

• Take a lump sum distribution (full or partial). If you're younger than 59=, the financial costs can be steep for cashing out of your plan. Besides the 10% premature withdrawal penalty, your plan sponsor is required to set aside 20% for federal withholding tax on the amount you don't roll over directly.

• Leave it right where it is. If the vested balance in the account is over $3,500, most plans let you leave it in the plan until age 70 or retirement, whichever is later. Check with your employer's specific rules on this. If you're happy with the investment choices in your old employer's plan, you might as well leave it there. Otherwise, you might be stuck with limited choices in your new employer's 401(k), or have to pay commission fees in an IRA.