When rolling over your 401(k) is the wrong move

You're not working and at least 55

Did you turn 55 at any point in the year when you stopped working for your former employer? Are you younger than 59 1/2, the usual age at which you can start taking 401(k) distributions?

If so, you might not want to roll over your 401(k) into an IRA.

If you leave your job, you can take withdrawals penalty-free at a younger age from a 401(k) than from an IRA.

If you’re unemployed, your 401(k) might be a good source of income until you can find work again.

It’s a better option than going into debt.

Tread carefully, though: The downside of taking distributions at a younger age is that you have a smaller account balance earning investment returns for you. The power of compound returns diminishes as your nest egg shrinks.

Before you start taking distributions at an early age, think about the long-term implications of trading off money now for money later.