If you leave your job, what happens to the funds in your 401(k)? There are a few options, but if you ask your broker, you're likely to hear only one-roll the money over into an IRA. There are valid reasons for doing that; an IRA will most likely give you more investment choices than your 401(k) plan, for example. It will also give your heirs more options if you die. Most 401(k) plans will force your heirs to take the assets immediately, often with disastrous tax consequences.
But there is another side to the argument. Fees are one reason to keep your money in your 401(k). Investors in 401(k) plans often pay lower administrative fees, which can add up over the years and have a significant impact on the size of your nest egg. A 401(k) also has more lenient withdrawal rules. You can start taking distributions from your 401(k) without paying a 10% penalty at age 55. With an IRA, you have to wait until you're 59.5. If you're strapped for cash, you can take out a penalty-free loan from your 401(k); with an IRA, except for special circumstances, you can't take out money penalty-free unless you pay it back within 60 days.
If you do decide to roll your 401(k) stash over into an IRA, make sure you do a direct rollover, in which your employer sends the money to the IRA administrator. If you take a check for the assets, your employer will take out a 20% withholding tax. You must reinvest the cash into an IRA within 60 days or Uncle Sam will keep the withholding, slap you with any additional taxes you might owe, and tack on a 10% penalty if you're under age 55.