401(k) Rollovers:

Your Quick Start Guide

After leaving your old job where you had a 401(k), here are a few options to consider.   

  • Convert the 401(k) into an IRA in your name.

  • Leaving it with your old employer may create heartache moving it at a later date if the company closes, transfers custodians or some other issues.  

 

How to start a rollover

Don’t have the provider to cut a check in your name; you’re at risk of owing up to a third of your balance to the IRS.

Four steps to roll over your funds without incurring any unpleasant tax surprises:

  • Decide what time of investment you want.

  • A Roth IRA

  • A Traditional IRA

  • Rollover to your new employer.

 

Establish a new account where you want to roll it over to. 

The next step in very important. You will need to contact the custodian of your old 401(k) plan to request a “Direct Rollover.”   The term “Direct Rollover" means that the 401(k) custodians will cut a check directly to your new IRA account and not to you personally.

 

Choose where you want to open your IRA.

 

  • Bank

  • Brokerage

  • Insurance company

  • Another recognized IRA custodian

 

How to choose an IRA provider

Finding the best account provider starts with knowing risk tolerance.  If you are an aggressive investor you may wish to move yours to:

 

  • A self-directed IRA at a discount broker where you can select your investments.

  • A managed account that will allow someone to manage your investments for a fee.  

 

If you’re a less aggressive investor you may elect:

  • Bonds,

  • Treasure notes,

  • Bank or

  • Insurance Annuity.

 

 

OPTIONS FOR HANDS-OFF INVESTORS

 

Whatever your choice, if you’re not interested in researching and choosing individual investments, you’ll need a provider to help you create a well-diversified portfolio that runs largely on its own, a bank (CD’s and Bonds) or an Insurance Company (fixed, indexed or variable annuity)

 

CAUTION ABOUT FEES

 

Wherever you decide to move your 401(k), you should ask about fees and all fees including underlying fees like;

  • transfer fees

  • upfront fees

  • backload fees

  • acquisition fees

  • management fees

  • policy fees

  • rider fees

  • income fees

  • admin fees

 

BENEFICIARIES

Wherever you decide to move your account(s), make sure they list your beneficiaries including contingent beneficiaries to avoid afterlife issues.