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Not knowing all the details of your situation, I won't try to give specific advice. You should see a good financial planner for that. I can shed a little light on a couple important issues.

If you close the 401-K, your former employer will send you a check for your after-tax contributions. You owe no taxes on this as you already paid them, so just invest it in a taxable account or live off it for awhile.

You say you have not been participating in this plan for a year. Be sure they will still let you get out. When I was re-organized into unemployment, my former employer's plan offered two alternatives: withdraw all funds from their 401-K within 60 days or leave it there, with no withdrawals permitted, until I was 65. Get the idea that they didn't want to be bothered by ex-employees? Every plan is different, but if there is anything like this in yours, get out immediately. You need the flexibility that an IRA offers.

Speaking of flexibility, the variety of investments for an IRA compared to most 401-K's makes conversion pretty attractive.

Good luck!
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