If I change jobs a lot, should I consolidate my retirement accounts?

Keep Your 401(k) with Your Old Employer

The biggest headache of leaving your retirement savings in your old employer's retirement plan is trying to keep track of multiple retirement accounts. But if you are the kind of highly organized person who doesn't mind receiving and deciphering multiple earnings summaries, consider the advantages of leaving your 401(k) savings right where they are.

Before you quit your current job, you need to check with your human resources department about the company's "vesting" policy. One of the greatest perks of a 401(k) is that your employer matches a percentage of your contributions. But at some companies, those matching employer contributions are deleted if you leave the company before you are "fully vested" [source: Brandon].

Vesting policies differ from company to company. Some use a gradual scale where you get to keep 25 percent of matching funds for each year with the company. Others don't give anything if you leave before four or five years [source: Investopedia]. If you are very close to being fully vested, it might be worth sticking with your current job for a few more months to save potentially thousands of dollars in free money.

It might be tempting to roll over your old 401(k) money into an IRA, but there's a catch if you plan on retiring early. With a traditional IRA, if you retire at 55 and want to withdraw money from your account, you will most likely be slapped with an early withdrawal penalty. (With a Roth IRA, you can withdraw the money at any time since you already paid taxes on it.) There are exceptions for first-time home buyers, educational expenses and certain medical expenses. With a 401(k), however, you can withdraw money penalty-free if you retire at age 55 or older [source: Anderson].

Now let's look at the advantages of consolidating your retirement accounts in a new 401(k) or a rollover IRA.