INVESTINGLIFESTYLE & TRAVEL

Rolling Over Your 401(k) with Confidence

If you’ve recently changed jobs or are considering a career move, you might be wondering what to do with your 401(k) from your previous employer. Rolling over your 401(k) into a new retirement account can be a smart move, but it’s important to understand the process and consider your options carefully.

Evaluate and Compare Your Options:

• Look at the fees associated with each option and compare the investment choices available. Lower fees and a wider range of investment options can make a big difference over time.
• Keep it with your former employer: Some plans allow you to keep your 401(k) with your old employer, but you likely won’t be able to make any new contributions after you leave that company.
• Roll over to a new employer’s plan: If your new employer offers a 401(k) plan that accepts rollovers, this can simplify your retirement savings by keeping everything in one place.
• Roll over to an IRA: Rolling over your 401(k) into an individual retirement account (IRA) can offer more investment opportunities and potentially lower fees.
• Cash it out: Withdrawing your 401(k) funds is generally not recommended due to taxes and potential penalties.

Possible Tax Implications:

Rolling over your 401(k) into an IRA or a new employer’s plan is usually a tax-free transaction. However, cashing out your 401(k) will result in taxes and possibly early withdrawal penalties if you are younger than 59 ½ years old.

Understand the Process:

• Contact your former plan administrator: Reach out to your former employer’s plan administrator to inform them of your decision to roll over your 401(k). They will provide you with the necessary forms and instructions.
• Choose your new account: Decide whether you want to roll over your 401(k) into an IRA or a new employer’s plan. Make sure to research and compare the options.
• Complete the rollover form: Fill out the form provided by your former employer’s plan administrator. It is best to opt for a direct rollover, where the funds are transferred directly to your new account. This option helps to avoid taxes and penalties. If you receive a rollover check from the transfer, you typically must reinvest into another qualified account within 60 days to avoid income taxes and a 10% early withdrawal penalty.
• Monitor the transfer: Keep an eye on the transfer process to ensure everything goes smoothly. It can take a few weeks for the funds to be fully transferred.
• Review your new account: Once the rollover is complete, review your new account to ensure that the funds have been deposited correctly and that you’re satisfied with the investment options.

Tips for a Smooth Rollover:

• Consult a financial advisor: If you’re unsure about the best option for your situation, consider consulting a financial advisor for more personalized advice.
• Avoid cashing out: Withdrawing your 401(k) funds can lead to significant taxes and penalties. It’s usually best to keep your retirement savings invested.
• Stay informed: Keep yourself informed about the rollover process and any deadlines to avoid unnecessary complications.

By carefully considering your options and following these steps, you can ensure that your retirement savings continue to grow and work for you in the long run. If you have any questions or need further assistance, don’t hesitate to reach out to your plan administrator or a financial advisor.

Sources:

https://www.forbes.com/councils/forbesfinancecouncil/2025/02/13/do-you-know-about-the-rollover-options-for-your-401k/

https://finance.yahoo.com/news/401k-gold-ira-rollover-guide-140000799.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAHhfnuU2yHQVqAg2AZbNC9etSerPrt-rwVJ9tuEx7EYua7r9JTHE8xYlmwQqlr23VX2y1-t1TBBVQntLHrRva9pgFikjiDLxmok31vxIsiqxKz_OFXwqyGsdTBTK1FSG9oEduMg66CrgblmGB-l90Ef5cDcqZxZ_Q3Z_KYP5ax4w

https://www.fidelity.com/viewpoints/retirement/what-to-do-with-an-old-401k

https://www.ramseysolutions.com/retirement/how-to-rollover-401k-or-ira?srsltid=AfmBOopzxVYtLEOuSH0IDTIvUcmLyl_70U3NePLtssDKtMpoYK_6ja0R

https://www.investopedia.com/ask/answers/08/distribution-traditional-ira.asp#:~:text=The%2060%2Dday%20rollover%20rule%20says%20you%20must%20reinvest%20money,without%20you%20ever%20taking%20possession.)