What Is A 401k Rollover?

If you have a 401k with your employer and decide to leave that employer or retire or somehow need to change over your 401k, then this is possible and is not hard to accomplish. The money in your 401k belongs to you, not your employer and you don’t want to lose the right to keep whatever money is in the account when you decide to leave your employer. Enter what is called a 401k rollover.

401k rollovers are when someone take their money from one 401k account and moves it into another account. There are some easy ways to do this where you won’t be subject to the penalties of an early withdrawal. Since a 401k is funded with pre-tax dollars, if you don’t do a rollover the right way, you will end up paying a lot of taxes and penalties for early withdrawal.

Options for 401k Rollover

There are three main options for a 401k rollover. These are rolling it over into another employer’s 401k plan if you change jobs, put the money into a brokerage account IRA, or put the money into a mutual funds company account.


New Job 401 K Pros and Cons

There are pros and cons of all three types of 401k rollover. The pros of doing a 401k rollover into a new job are that there is no maximum or minimum as to the amount of money that can be moved from one account to the other. However, there are a few cons.

If you join an employer’s 401k plan then you have to follow its rules and regulations. It is also possible that you may have to pay a percentage for each investment you make, depending on the type of new employment you take. If you instead invested it on your own, you could possibly avoid that issue.

401k Rollover to a Brokerage IRA

The next 401k rollover is to put the money into a brokerage IRA. This can be done at most banks, as well as at places like E Trade, TD Ameritrade, or Trade King. These IRA brokerage accounts are also very flexible when compared to some of the other types of 401k plans. You won’t be restricted to just index funds or mutual funds.

There are 1000s of different kinds of stocks or mutual funds to choose from and with a brokerage IRA it’s possible to get things like mutual funds, individual bonds, individual stocks or other kinds of investments that could prove to be very lucrative. So, if you want flexibility, this is a good choice.

There are a few cons to a brokerage IRA account to do a 401k rollover. Cost is one of these, as ever private investment is going to cost you money in the form of an investment fee. However, if you choose properly, not all of these account charge high fees.

401 k Rollover Into a Mutual Fund Company IRA

Or, your third possible choice is to do a 401k rollover into an IRA that is held by a mutual fund company. These could include Vanguard, Ameritrade, Fidelity or others. The cheapest way is to put your funds right into their funds and then there is likely not going to be a fee. However, if you would rather be flexible, they you may want to put some of your money into other companies, stocks, or bonds. There are various types of these plans and each one may have their own requirements for investments you make.

Steps to Doing a 401k Rollover

So, after you have decided what kind of 401k rollover you are going to do, there are a few steps to follow to get it done. Here they are:

1. Check Your 401k Rollover Eligibility

First, you must check to see what type of 401k eligibility at your old job. You don’t want any surprise fees or repercussions. Plus your old employer has to agree to release the funds.

2. Get the Proper 401k Rollover Forms

Once you know that your 401k funds are free and clear and the old employer releases them. Now you need to get all the correct 401k rollover forms to switch over your funds. These can be found at your old employer or you may be able to download them online.

3. Get Requirements for New 401k Provider

Next, you will need the forms from your new employer or other source of the place where you are doing the 401k rollover. Each type has its own unique requirements you need to follow so make sure you have all of the forms you will need to do the 401k rollover.

Make sure you fill out all of the forms properly. There is a lot of information to put on them so check each section carefully. Also, be sure to pick “direct rollover” as this makes sure the funds will go directly into your new 401k rollover account. This may happen by check or wire in most cases.

4. Submit the Forms and Check on Them

Once accomplished, you now need to submit your filled out forms. These will need to be turned in to the new location either in person, fax or mailed. But don’t forget about it after you do it. You should check up on things to make sure it all went into place correctly. It is up to you to make sure everything goes smoothly because no one else is likely to do it for you.

All in all, doing a 401k rollover properly is vital as it may be a large amount of funds that you have and you don’t want to lose a dime of your hard earned investments. Be sure to determine which of the 401k rollovers are the best for your situation, get the proper paperwork, fill it all out and turn it in. This will help you to keep on funding your future retirement through your chosen investments.