401(k) Rollover In 3 Easy Steps

If you've left your job but still have a 401(k) with your former employer or you're retiring, you may have questions about what to do with your retirement account.

Typically, you have four options to consider: leave your assets in a previous employer's plan, cash out your 401(k), initiate a 401(k) rollover into a new employer's plan, or roll over into an IRA. You can initiate a rollover whether you have a traditional 401(k) or a Roth 401(k).

In this article, we will discuss how you can rollover an old workplace retirement plans, such as 401(k) plans, into an IRA in three easy steps.

STEP ONE - PICK YOUR CUSTODIAN

A custodian is a company that holds your IRA account and provides you with statements and technology to help you manage your account. It's important to choose a custodian that provides you access to resources and tools that can help you make well-informed decisions about investing for your retirement.

There are many custodians available. Each offers slightly different fees and available technologies to help you manage your account—so, shopping around can be beneficial.

Need help picking the right custodian for your 401(k) rollover? We can help: Contact Quiver Financial

STEP TWO - OPEN A NEW ACCOUNT WITH YOUR CUSTODIAN OF CHOICE

Once you have chosen the custodian, the next step is to open an account with the new custodian. In most cases you will need to answer some basic personal questions and possibly provide a copy of your driver’s license. It is important to open your new account prior to contacting your 401(k) provider to request a rollover. Many times, a 401(k) provider will ask for the name of the new custodian as well as the new account number to include on the rollover distribution.

When you begin a new retirement savings account, you get to choose what type of account you want. There are two types of IRAs (Individual Retirement Account) commonly used when you roll over your 401(k). You can usually choose between a traditional IRA or a Roth IRA. Each has its own benefits, investment options, and limits.

For instance, Roth IRAs have eligibility requirements based on earned income; traditional IRAs don't have this requirement. Traditional IRA contributions can be tax deductible if it meets certain requirements.

Roth IRAs offer withdrawals before you turn age 59 and a half that don't require you to pay taxes or penalties. Again, there are limits and requirements. Knowing your retirement goals can help you determine which account type suits you best.

Which option is best for you? This video can help you decide:

STEP THREE - CONTACT YOUR 401(K) PROVIDER

Once you have the new custodian picked out and have your new account number available it’s time to contact your 401(k) provider. In most cases this is the financial institution that may be sending you quarterly statements about your 401(k). In the event you are not certain you can contact the employer related to the 401(k) to ask.

In most cases, rollovers are painless and can be performed with a phone call to the 401(k) provider. Contact the 401(k) provider by phone and tell them you would like to process a rollover into an IRA.

From there the 401(k) provider representative will confirm you have received a special tax notice. Tax questions can sometimes be stressful, but there's no need to worry. It's simply a page of disclosures explaining the different tax ramifications if your rollover isn’t performed properly. The most important thing to remember is to make sure any funds you receive from the 401(k) are deposited into your new IRA account within 60 days.

Funds from your 401(k) will either be mailed to you as a check made payable to the new custodian or the 401(k) provider will send the funds directly to the new custodian.

In the event you receive a check in the mail made payable to the new custodian there is no need for you to endorse the back of the check. All you will need to do is make sure to forward the check to your new custodian within 60 days of the date on the check and your work is done!

Your retirement, your choice

Setting goals for your retirement can help you determine what you need to achieve your dream retirement. Rolling your 401(k) over into an IRA is a simple solution that can have long-term positive effects on your retirement, but it's only one option.

Know what you want so you can get what you want.

Want to explore the advantages of offering your employees a 401(k) benefit instead of the state retirement plan?
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Colby McFadden

Founder, Quiver Financial

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Director of Retirement Services,
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Patrick Morehead

Director of Alternative Investments,
Quiver Financial

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