You just started a new job. Here's how to rollover a 401(k) to a new employer.
Updated: Mar 11, 2022
Starting a new job can be an exciting and life-changing experience, but it can also bring a lot of stress and change to your life. Starting a new job means learning how your new company works, meeting new people, and filling out new hire paperwork. All of this can be stressful, but one thing does not have to be and that is rolling over your 401(k) to your new employer. In this blog, we will walk through the steps on how to rollover your current 401(k) to your new place of employment.
Deciding Where Your Money Will Go
Before you begin rolling over your 401(k) plan you need to choose where the money will go. There are several plan options to choose from depending on your needs, age, investment options, employer’s plan, and the amount in your 401(k).
Leave your money in your old 401(k) plan
With this option, you cannot contribute additional funds into your account.
There is often a minimum balance that is required to keep your old plan.
If you have less than $5,000 with your previous employer, they may require you to rollover the funds.
If you have less than $1,000 with your previous employer, they may choose to cash you out of the plan.
This is typically not the favored option when starting a new job.
Rollover your money to an IRA
Your money can continue to grow tax-deferred.
You can withdraw money penalty-free for qualifying purchases.
The options for investment may be greater than with your old employer’s plan.
RAs typically have more mutual funds for you to choose from.
Rollover your 401(k) into your new employer’s plan
Not every employer will allow you to rollover your 401(k) plan.
Only having one 401(k) will make it easier to manage your retirement savings.
Your savings can continue to grow tax-deferred.
Your investment options will be limited to those offered under the new Plan.
How Rollovers Work
Whether you are rolling over your 401(k) plan to an IRA or to your new employer’s 401(k) there are a few steps to complete the process.
Meet with your plan provider/employer to see which rollover options they offer.
Choose which plan option will work best for your retirement goals.
Fill out the paperwork to start the rollover process with your employer and investment provider.
Choose between direct or indirect rollover: - With a direct rollover the funds are sent straight from your old account to your new account through your provider. This is the option that most investment professionals recommend -With an indirect rollover the funds are sent to you in the form of a check which you then must deposit into the account yourself. This option can lead to a 20% tax withholding by the IRS on the front end which you would need to make whole to avoid paying taxes and then you will get the 20% returned to you when you file your tax return reporting that all the funds were rolled over. You only have 60 days to deposit the funds into your new account.
Start making contributions to your new plan!
With just 5 simple steps, rolling over your 401(k) plan will be one of the easiest parts of starting your new job! Now you can focus on learning your new role and meeting your new colleagues.
Investing in your retirement doesn’t have to be an intimidating process. Here at RPCSI, we are here to help you figure out the best option for you or your company. Contact us today to learn how we can help you.