(MONEY Magazine) – Once you're done telling your boss you've got better things to do with your life, you'll need to pass another key message to your benefits administrator: where to send your 401(k). Don't simply ask your employer to cut you a check. You'll only do the IRS a huge favor and shortchange your retirement. Instead, keep your money growing tax-free by rolling it over into an IRA or staying with a 401(k). Here's how.

THE DECISION

Never leave things up to your boss. If your balance is between $1,000 and $5,000, a new rule lets your former employer move the money into a default IRA unless otherwise instructed.

• You can invest an IRA with any fund company or brokerage, so this option gives you a wider range of investment choices than most 401(k)s do.

• An IRA offers you more flexibility in naming beneficiaries and arranging withdrawals.

• Consolidating all of your retirement accounts at one firm can cut your fees and simplify your money management.

Occasionally it makes sense to leave your money in your old plan or transfer the funds to the 401(k) at your new job.

• If you retire at age 55, you can pull your money out of a 401(k) without penalty, while you generally have to wait until age 59½ with an IRA.

• You may want the option to borrow from your account, which is possible only with a 401(k).

The IRS rules governing tax-deferred accounts are strict. One wrong move could cost you a big chunk of your retirement savings. Follow these steps to transfer your plan to an IRA or a new 401(k).

• You must arrange for a direct rollover, which means your employer makes the check out to your IRA trustee or new 401(k) administrator, not you. Otherwise the IRS considers that money a taxable distribution.

• One phone call may be enough: Some fund groups will handle all the paperwork and arrange the transfer. If not, start with your benefits manager.

What if you already got a check?

• You have 60 days from the date of the distribution to transfer the money into a rollover IRA or another 401(k) and avoid income taxes and a 10% penalty.

• You will have to come up with the cash to cover the 20% that your former boss automatically withheld to cover taxes. You'll get the money back after you file your return.

Wall Street wants your IRA rollover, and that means lots of investment choices and portfolio tools--and lower costs. In shopping for a home for your IRA, keep these considerations in mind.

• If you have a large portfolio, look for a sponsor that offers a broad selection of stocks, bonds and funds. And see if your big balance qualifies you for free advice.

• If you have a small account, consider a target-retirement fund. These all-in-one portfolios give you a well-diversified asset mix that shifts appropriately as you near retirement.

If you are close to retirement, think about how you'll pull your money out.

• You must take distributions from tax-deferred accounts after you turn 70½.

• Your minimum withdrawals are based on your and your beneficiary's life expectancies. Naming a child as beneficiary stretches out your payouts and lets more money grow tax deferred.

RIP AND SAVE