Leaving your job? Roll 401(k) into an IRA for more options

— -- Most employees leave their jobs with a box full of keepsakes: company awards, coffee mugs, maybe a photo of the boss wearing a lampshade on his head. But here's something many departing employees leave behind: their 401(k) plans.

More than 40% of assets in 401(k) plans owned by workers who left their jobs in the first quarter of 2008 were still with their former employers a year later, according to a recent analysis by Charles Schwab. The remaining assets were invested in an individual retirement account, rolled into a new employer's plan, or cashed out.

Leaving your 401(k) with your former employer is vastly better than cashing it out, which will trigger taxes, and if you're under 59½, early-withdrawal penalties. But IRAs offer numerous advantages not typically available to 401(k) owners. Here are five reasons you should consider rolling your money into an IRA:

You're unemployed and need to buy health insurance.

If you're out of work, you can take penalty-free withdrawals from your IRA to pay the premiums. To qualify, you generally must have received unemployment benefits for at least 12 consecutive weeks. The rule also applies to premiums paid under COBRA, a federal law that allows you to continue your former employer's coverage for up to 18 months, says Bob Scharin, senior tax analyst for Thomson Reuters.

You're considering buying a home.

If you're a first-time home buyer, you can withdraw up to $10,000 penalty-free from your IRA to put toward the purchase of a principal residence. Even if you've owned a home in the past, you may qualify: The law defines a "first-time home buyer" as someone who hasn't owned a principal residence in the two years prior to the home purchase.

You need money for college.

You can take penalty-free withdrawals from an IRA to pay college expenses for you, your spouse, your children, or your grandchildren.

None of these penalty-free withdrawals are available if you leave your money in a former employer's 401(k) plan, says Catherine Golladay, vice president for 401(k) advice and education at Charles Schwab.