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20%. That's what the plan must withhold if the check is made out to you instead of your new account (IRS).
When you change jobs you can usually leave your 401(k) where it is, move it into your new employer's plan, roll it into an IRA, or cash it out, and cashing out is usually the costliest choice. If you move it, ask for a direct rollover so the money goes straight to the new plan or IRA; a check made out to you triggers 20% mandatory federal withholding and a 60-day deadline to redeposit the full amount (IRS).
How many old 401(k)s do you have right now? If you had to think about it, that's the problem.
Ask for a direct rollover. No tax is withheld when the plan pays the new plan or IRA directly (IRS).
Avoid the check made out to you. A plan distribution paid to you has 20% mandatory withholding, even if you plan to roll it over. You then have 60 days to deposit the full amount, using other money to replace what was withheld, or the shortfall is taxable (IRS).
Watch the Rule of 55. If you leave your employer in or after the year you turn 55, that plan's withdrawals can avoid the 10% additional tax, but not after you roll it to an IRA (IRS rules as of 2026). See our retirement planning checklist.
Direct rollover: no withholding. Check to you: 20% withheld, 60-day clock.
You can usually leave it, move it to your new employer's plan, roll it into an IRA or cash it out. If you move it, use a direct rollover so no tax is withheld (IRS).
In a direct rollover, the plan pays the new plan or IRA directly and nothing is withheld. In a 60-day rollover, the check is paid to you, 20% is withheld, and you have 60 days to deposit the full amount (IRS).
The taxable amount is income for the year, and if you're under 59½ you may owe a 10% additional tax unless an exception applies (IRS).
It depends on investment choices, costs, creditor protection, the Rule of 55 and whether you plan backdoor Roth contributions. Compare both before you move it.
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This page is education, not legal, tax or investment advice, and it is not a promise about investment returns or tax results. Examples are illustrations, not clients. Your estate attorney drafts legal documents and your CPA prepares your returns; we coordinate the financial plan around them. Rules and figures change; confirm your own situation before acting. Pinnacle Private Wealth® is a marketing name used by Pinnacle Financial Planning, a Registered Investment Advisor. Registration does not imply a certain level of skill or training.
Reviewed by Dr. Pat Pachciarz®, The Pinnacle Group (Aurora, IL). Last reviewed October 18, 2026. Figures change; we re-check them against the sources above.