401k Rollover Option

The Internal Revenue Code uses very sensitive, diplomatic language to describe your departure from a job: The Code never says "lay-off," "furlough," or "suspension"; and its authors never-ever would have considered ugly words like "fired," "dismissed," or "terminated." When they mean retirement, they say "retirement"; otherwise they always refer to packing-up your desk and leaving as "separation." No matter what the circumstances, no matter how grim and painful, the Internal Revenue Code always politely describes it as "separation."
At your separation, you may leave your 401k with your old employer. The law requires the old boss to maintain it for you until you reach retirement age or die. But the old boss reserves the right to charge you administrative fees for watching your money grow. And especially if you suffer "separation anxiety," it's best to cut all the ties; it's your money, so take it with you.
You should take advantage of one among your several 401k rollover options.
If you go immediately to another job, use your 401k rollover to move your retirement funds into the new boss's 401k plan. Because you already have rights and privileges under the 401k rollover guidelines, you do not have to wait for vesting to get into the new company's plan. You may, however, be required to complete your training and probationary period before you exercise your 401k rollover privileges. If you exercise this option, make sure you do not exceed the annual limit on 401k contributions. The new payroll administrator will have no way of knowing how much you already have invested, and if you have increased the amount of income you wish to defer, you create the risk of violating the ceiling. You will have until April 15 of the next calendar year to clear the excess from your account and move it to some other safe, interest-rich place.
If, on the other hand, you carpe diem, seizing this opportunity to follow your passion, setting-up your own business and doing something you've always dreamt of doing, then you will have two 401k rollover options: You may set-up a 401k for your sole proprietorship, administering your own plan according to the IRS guidelines, and keeping your retirement account growing the way it always has. When you hire more employees, you can expand the 401k to include them, too. Or you may exercise your 401k rollover privileges by putting your savings into an Individual Retirement Account at the financial institution of your choice. Most bail-out-proof banks offer excellent investment products with proven track records of exceptional performance, and you will have the option of moving your funds around as you always have. Using your 401k rollover privileges to move your money into an IRA, you also gain liquidity; if you need to invest some of your retirement funds in your start-up enterprise, the IRA puts very few restrictions on withdrawals. You will, of course, have to pay taxes on your distributions, but it still may represent the easiest way to capitalize your new venture.