Where to Rollover Your 401k Plan

If you are one of the unlucky ones who has lost your previous job or maybe changed employer, then you will have the sum of money that you were saving in your 401k plan at your disposal, and the best option for you to choose is a rollover.
This way you will be transferring your old 401k plan into a new retirement account, without paying taxes or penalties that go with withdrawals. The rollover may be into one of three accounts:

1. If your new employer offers it, then you may rollover to another 401k plan. The advantage of this option is that even though your saved balance is still low, you will still be able to invest the funds in options that might give you a better return in the long term. The disadvantages of this option are that you will loose flexibility, since your employer will make the investment choices and not you. In addition you may be subject to high fees.

2. The second option is a Brokerage IRA, which will provide you with lots of flexibility. In this account you will be able to choose from lots of investment options. You will also be able to purchase stocks and bonds individually as you desire. The disadvantage of this option is the cost, since every time you trade, you will have to pay a fee, which you wouldn’t pay in the 401k plan.

3. The final choice is a Mutual Fund IRA such as the one offered by Fidelity. This is definitely the cheapest way to invest in the options that these companies offer, and the other advantage is that if you meet some requirements, you won’t even pay an account fee! The disadvantage in this case is that you will be tied to the investment choices offered by this particular company. You will also be tied with the minimum investment amounts, which vary from one option to another, and you may end up buying in one fund, while saving to invest in another.

Reference: http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/