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NEW YORK (CNN/Money) - I'm trying to decide whether I should roll the money in my old 401(k) account into the 401(k) plan offered by my new employer or roll it into an IRA rollover account with a mutual fund or investment firm. What factors should I consider in making this decision?

-- Ann Lumpkin, Birmingham, Ala.

Let me start by congratulating you for at least coming to grips with the right issue -- namely, whether to move the money into your new employer's 401(k) or transfer it into an IRA rollover.

Too often, employees who are changing employers view that big fat 401(k) balance as a chance to have some extra spending money and simply have their old 401(k) plan cut them a check. If the money is spent then it's not going to be much help later in retirement.

Actually, it might not even be as much help now as you think since people who opt for this "take the money and run" approach must pay taxes at ordinary income rates on their 401(k) funds, plus, in many cases, a 10 percent penalty. This is not the way to build a retirement nest egg.

But you, I'm happy to say, seem determined to keep growing your 401(k) money free of taxes until you're ready to start making withdrawals at retirement. Question is, which is the better way to do that: in a new 401(k) plan or an IRA rollover account?

I'd say that main issue is making sure that you have access to a decent menu of investing options. Basically, you want to be able to build a retirement portfolio that includes a broad range of assets -- growth stocks, value stocks, small shares and large shares, bonds and perhaps some international equities -- that are managed by an investment firm that has a solid performance record. And you want to be able to access those options without paying return-zapping sales and/or portfolio management fees.

So the first thing you want to do is size up the investment offerings in your current 401(k) plan.

Do you have a wide enough array of choices to diversify your holdings properly? These days, most plans offer a dozen or more investing options; in some cases, there may be several dozen.

But, remember, sheer number of choices alone isn't what matters. You want to be sure there are funds available in a variety of asset classes. If your fund offers six large-cap growth funds, six large value funds, a few balanced funds and maybe a Ginnie Mae fund, you won't have the raw materials to build a well-diversified nest egg.

Next, I'd look at costs. Although it's an anomaly for funds in 401(k) plans to charge up front sales fee, there are some plans (usually very small ones) that do so. If your new plan is one of them -- and if that sales charge would be applied to the assets from your old plan -- I'd definitely go the IRA rollover route.

As for ongoing expenses, I'd ideally want to see at least a few low-cost options -- actively managed funds in the 0.5 to 0.75 percent range for annual management fees and index funds with even lower expenses. At the very least, I'd want to be able to invest in equity funds that have ongoing annual portfolio management expenses of no more than 1.25 percent and bond funds that charge no more than, say, 0.75 percent.

If the ongoing expenses in your new plan are much beyond the range I've described above, then I'd say you're better off opening an IRA rollover account at a brokerage firm or mutual fund company that offers lower cost options. Your money will grow faster if you keep the drag of expenses to a minimum. (To get an idea of how much more money you might accumulate by keeping expenses down, click here).

I should add, however, that deciding to put your old 401(k) stash into an IRA rollover does not necessarily mean that you should forego participating in your new 401(k).

The reason is that the tax benefits you receive for making new contributions, plus any employer matching funds you receive on those new additions, would likely outweigh the disadvantages of high costs and even poor investing options. It is possible, of course, that the fees in your new plan could be so high and the choices so bad that you might want to opt out of the plan altogether. But that would be a very rare situation.

If you do go the IRA rollover route, be sure to do a direct rollover, aka a trustee-to-trustee transfer in which the money goes directly from your old plan to the IRA rollover account.

If your old 401(k) sends the money to you instead, it would be required to withhold 20 percent of your 401(k) balance even if you intend to put that money into an IRA rollover account. You'll get that 20 percent back when you file your taxes, but in the meantime you'll have to come up with that amount to complete the rollover.

If you can't, the IRS will consider that amount a distribution on which you would owe taxes and, possibly, a 10 percent penalty. (In some cases, a 401(k) plan may cut a check made out to you and the trustee of your new rollover account. As long as you deposit the check in the rollover account, withholding takes shouldn't be an issue. What you don't want is a check made out only to you.)

One final note: a provision in the big tax bill passed in 2001 makes it easier to move money back and forth between IRAs, 401(k)s, and other tax-advantaged retirement accounts (although your employer's plan must accept such transfers).

So even if you do an IRA rollover now, you may be able to transfer that money to another employer's 401(k) sometime in the future, assuming you like the choices and the costs in that plan.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World."