I have a friend who has (2) 401k accounts from previous employers, she wondered if she has to roll them over to another 401k or could she roll over to something like a CD..

She has a couple of choices:

1. Do nothing - just let 401(k) plans stay where they currently are.
2. Roll one (or both) into rollover IRA(s). This is what I would recommend. She can set up a rollover account at an investment house such as Fidelity, Vanguard, Schwab, T. Rowe Price, etc, and request that they work with the administrators of the 401(k) accounts to roll the proceeds over. All of these investment houses make it very easy to do - you can go online to enroll. It takes a few weeks for everything to change over. After you set up the rollover account using the monies from one old 401(k), she can then roll the second one into it that same account. It's important that she let the investment house handle all the paperwork - she does not need to contact anyone at the old 401(k) herself. Under no circumstance should she herself be the recipient of any of the money directly, because that could trigger some unexpected and hefty tax penalities if it isn't handled just right. Also, keep in mind that the rollover IRA must be a different account than any existing traditional IRAs or Roth IRAs she may already have.

She will have to decide what to invest in - all of the above houses offer many choices of no-load mutual funds and index funds, and it's pretty easy to get diversity of large cap and small cap stocks, value and growth stocks, and domestic and foreign stocks, as well as bond funds. They all also have a lot of handy on-line tools to help her through this.

If she is employed by another company that has a 401K she can rollover the accounts into the current company's 401K. If not, and she doesn't want to leave the money with the previous employers then she can roll them into an IRA. That IRA can be invested in whatever she wants, CDs, mutual funds, stocks etc.

But it has to be rolled over into another tax deferred vehicle, otherwise she will incur penalities.