3 Reasons Not Rolling Over a 401(k) Could Be a Big Mistake When You Leave Your Job

Don't end up regretting your decisions about your 401(k).

If you leave a job where you had a 401(k), you have to decide what to do with the retirement money you have invested.

Typically, you have the option to leave the cash in your current account, if you choose to do so -- unless the company is ending operations and their administrator will no longer be managing 401(k)s or unless your balance is too low and the 401(k) administrator requires you to close the account.

You don't have to simply leave your 401(k) where it is, though, even if you have the ability to do so. You can also roll over the money either into your new employer's 401(k) or into a brokerage firm of your choosing. And, for many people, moving their money into a new account is the best choice while leaving it alone could be a decision you come to regret.

Here are three big reasons why that's the case.

1. You could forget about the account

Hard as it may be to believe, some people end up forgetting about 401(k) accounts entirely if they leave them with companies they left.

This can end up happening if you change jobs multiple times over the course of your career -- especially if you leave a job when you're young and your account balance isn't very high.

There's absolutely no reason to leave money on the table. Consolidating your old 401(k)s by always rolling them over into new accounts can help you ensure you never lose track of your retirement funds.

2. You could end up with an unbalanced portfolio

It's in your best interest to have a diverse mix of different assets that is appropriate for your risk tolerance level.

For example, you want your money spread across different industries and different size companies. You also want to make sure you have an appropriate amount of money in the stock market and in safer investments, given your age and investing timeline.

Unfortunately, if you have multiple 401(k) accounts with different employers, it can be harder to keep track of exactly what your asset allocation looks like.

You'll increase the chances of being overly aggressive or overly conservative with your investments if you can't look at your entire portfolio in one place and see the big picture. It will also be harder to periodically rebalance your portfolio as you move closer to retirement, since you'll need to log into multiple different accounts each year and move money around to get the appropriate asset mix for your current age.

3. You may be missing out on better investment opportunities

Often, workplace 401(k) accounts provide a limited range of investments. These may be funds with expensive fees you have to pay. Your 401(k) may also come with administrative costs.

Paying added investment fees and being left with a narrow range of funds to invest in can deprive you of opportunities to put your money into assets that stand a better chance of providing generous returns over the long-term.

When you leave your job, you have an ideal opportunity to move your 401(k) funds into a rollover IRA. You can open an account with a brokerage firm of your choosing and gain access to a huge array of different investment options, including individual stocks and commission-free ETFs with low expense ratios.

If you want to make sure your money is in accounts that provide you with flexibility, charge low fees, and you won't forget, rolling over your 401(k) each and every time you leave a job is often the best option. You should seriously consider making this financial move a top priority whenever you make a career change, as doing so can help you ensure you're taking the necessary steps to have a secure future in your later years.