Table of Contents
Are you leaving your money with your ex?
This question is referring to leaving your 401K behind with your ex-employer! LOL
There are about $30M in forgotten 401ks! Is one of those yours? If it is, then you are in the right place. Rolling over your 401k is the best thing you can do to keep your retirement savings growing efficiently. You will have full control, rather than depending on your ex-employer to have your best interest.
Let’s break it down step-by-step so you can make the best decision for your financial future:
What is a 401K Rollover?
First things first: what exactly is a 401K rollover? Simple! This means you are moving your retirement fund from one 401K plan to another.
You can roll over to an Individual Retirement Account (IRA) or your new employer’s 401K. This can help you manage your retirement funds better and avoid unnecessary fees and taxes.
Why Should You Rollover Your 401K?
Before we dive into the how, let’s talk about the why because you can easily forget that you left your 401K account behind. Rolling over your 401K can offer several benefits:
- Consolidation: Having all your retirement funds in one place makes managing it easier.
- Investment Options: IRAs often provide a wider range of investment choices compared to 401K plans. This is your chance to move into an IRA.
- Lower Fees: You can save on fees with an IRA compared to an old employer’s 401K plan.
- Avoiding Taxes: A direct rollover helps avoid taxes and early withdrawal penalties.
Use this as a reminder to get your money from your ex-employer!
Types of 401K Rollovers
Here are a couple of different ways to easily roll over your 401K:
- Direct Rollover: This is the simplest and most tax-efficient method. Your old 401K provider transfers the funds directly to your new 401K plan or IRA. 401K provider can provide you with the forms to start the rolling-over process. You do not pay fees, and you do not pay taxes.
- Indirect Rollover: Here, you receive the funds from your old 401K, and you must deposit them into the new account within 60 days to avoid taxes and penalties. Be cautious with this option as it requires more hands-on work, and you want to avoid penalties if you do not deposit them on time.
Steps to Rollover Your 401K
Are you ready to get your money from your ex-employer?
Here are easy steps to ensure a smooth rollover process:
Step 1: Choose Your New Account
Decide whether you want to roll your 401K into a new 401K plan with your new employer or into an IRA. Take into consideration the investment options, fees, and flexibility of each to make an informed decision. Choose what works for you.
Step 2: Contact Your Old 401K Provider
Reach out to the provider managing your old 401K plan. Let them know that you want to initiate a rollover and ask for the necessary paperwork and steps to follow. They will guide you through their specific process.
However, if you do not want to contact the provider or simply forgot the information about your 401K accounts, you can use Capitalize. Capitalize is a third-party company that can help you find an old or lost 401K account for free. Capitalize designates a representative to help you from start to finish, removing the hassle and hesitation of starting the process.
Step 3: Open Your New Account
If you’re rolling over into an IRA, you’ll need to open an account if you don’t already have one. Most financial institutions make this process straightforward, and fast. If you’re transferring to a new 401K, ensure that your new employer’s plan is ready to receive the funds.
If you are transferring to an IRA, keep in mind that if you have a traditional 401K, the rollover has to go to a traditional IRA. If you have a Roth 401K, then the rollover has to go to a Roth IRA.
You want to do this because of the tax treatment of these accounts. Contributions to Roth accounts are made with after-tax dollars, which means you have already paid taxes on these contributions. Contributions to traditional accounts are made with pre-tax dollars, which means you have not paid taxes on these contributions.
Step 4: Request a Direct Rollover
Request a direct rollover for a hassle-free transfer. Provide your new account details to your old 401K provider. They will handle the transfer, ensuring that your funds move directly from one account to the other.
If you are moving to an IRA, contact your financial institution for steps to follow or contact Capitalize. Both options can help you smoothly transfer your 401K funds.
Step 5: Confirm the Transfer
Once the transfer is complete, verify that the funds have been deposited into your new account. This step is crucial to ensure that your retirement savings are secure and growing in the right place!
Potential Hiccups to Avoid
- Missing the 60-Day Deadline: If you opt for an indirect rollover, deposit the funds within 60 days to avoid taxes and penalties.
- Not Considering Fees: Compare fees between your old 401K, new 401K, and potential IRAs. Higher fees can eat into your retirement savings. Ask all questions necessary until you are satisfied and without doubts.
- Neglecting Investment Options: Ensure the new account offers investment choices that align with your retirement goals. Do your research!
My experience with a 401K
I was laid off on November 30th, 2023. I allowed myself to process the layoff and began the 401K rollover in February 2024. The process took about 3 weeks, and my 401K is now in my IRA account.
The process was extremely easy with Capitalize. There was a lot of handholding, which I appreciated because I knew that my community would be cared for with them. I wanted to experience this process with Capitalize and pass this information on to you! I was really curious if they had hidden fees, but NOPE, it was completely free!
This is your reminder to roll over your 401K soon!
I know rolling over your 401K can feel very daunting, but I can assure you it is very easy. This is your reminder to roll over your 401K soon! The goal is to maximize your savings and minimize any potential hiccups along the way.
So, take control of your retirement future!
When We Work Together:
- I help you make a plan that works for you to give your money direction
- I help you gain control of your money so you always know where your money is
- I help you understand how investing works so you can make your money work hard for you
I invite you to work with me 1:1 for four months. I want to help you feel empowered with your money instead of avoidant. Most of the time, we avoid taking control of our money because we lack personal finance knowledge. I want to help you build on the belief that you are good with money now. Book your call below.
It would be an honor to be part of your journey. I cannot wait to meet you!
