Big Lots workers can roll over 401(k) savings after leaving jobs

The biggest mistake is the fastest one

Cashing out your Big Lots 401(k) the moment you leave can turn a stressful transition into a much smaller check. The IRS says most pre-retirement payments from a retirement plan or IRA can be rolled over, which means leaving the job does not force you to treat that money like spendable income right away.

That matters more at Big Lots than it might at a stable employer. Big Lots filed for Chapter 11 bankruptcy protection on September 9, 2024, in the U.S. Bankruptcy Court for the District of Delaware, and later said it was preparing going-out-of-business sales and 555 layoffs at its Columbus headquarters after a sale to Nexus Capital Management fell through. With more than 10,000 employees before the restructuring, this was not a small paperwork issue. It was a companywide disruption, which is exactly the kind of moment when workers can make a rushed financial choice they regret later.

Your three main paths

The IRS lays out three common ways to move retirement money after you leave a job: a direct rollover, a trustee-to-trustee transfer, or a 60-day rollover if the money is paid to you first. All three are meant to preserve the tax advantages of retirement savings, but they do not work the same way in practice.

A direct rollover is the cleanest option. The money is made payable to the new retirement account, and no taxes are withheld from the transfer amount. A trustee-to-trustee transfer also keeps the money moving directly between accounts, which helps avoid the mistakes that come with handling a payout yourself.

A 60-day rollover gives you more control, but it also gives you more room to slip up. If the distribution is paid directly to you, the IRS says you generally have 60 days to complete the rollover. Miss that window, and the money can turn into a taxable withdrawal instead of a retirement transfer.

Why the payout can shrink before you ever touch it

The part that catches many workers off guard is withholding. The IRS says taxable eligible rollover distributions from an employer-sponsored retirement plan are generally subject to mandatory federal income-tax withholding, usually at a rate of 20 percent. Form W-4R is used so the payer can withhold the correct amount from nonperiodic payments and eligible rollover distributions, and the default withholding rate for eligible rollover distributions from qualified plans is 20 percent.

In plain English, that means a payout may arrive smaller than you expected. If you are trying to cover rent, gas, or a medical bill after leaving Big Lots, that withheld amount can make the difference between a short-term fix and a long-term mistake. A direct rollover avoids that problem because the money moves straight to the new account instead of passing through your hands first.

A cash withdrawal can also carry an added penalty if you are still under retirement age, on top of the income taxes that may apply. That is why the temptation to take the money now can be so expensive later. The retirement account may feel like one more bill to solve, but it is also one of the few assets that can still compound for decades.

What to do before you spend a dime

Before you accept a payout, ask the plan administrator exactly what options are available. The IRS says plan administrators must notify participants in writing that a distribution may be transferred to another individual retirement plan, and that notice is your cue to slow down and compare choices instead of reacting to the first check offered.

Use this simple decision map:

Why this hits Big Lots workers so hard

Big Lots workers are dealing with more than a normal job change. The company’s 2024 annual report showed 29,512,551 common shares outstanding as of April 12, 2024, a reminder of how large the business was before the collapse. Then the company moved from bankruptcy filing to store closures, and workers in Columbus and elsewhere had to make decisions quickly while the operation was coming apart around them.

That speed is what makes 401(k) mistakes so common. When severance, unemployment, health coverage, and job hunting all land at once, retirement savings can start to look like the easiest source of cash. But the IRS rules are built around the opposite idea: keep retirement money in retirement accounts whenever possible, because that is how workers preserve the most value from jobs that ended too soon.

For Big Lots employees and former employees, the bottom line is simple. Do not let a layoff turn a retirement account into a quick loss. If the money can stay invested through a rollover, the safest move is usually to move it, not spend it.