If you’ve recently switched employers or have an older 401(k) account that’s not being actively managed, you may want to consider a rollover, which involves moving savings from one retirement plan to another.
Fortunately, rollovers can be simple and painless once you understand how it works. Let’s walk through the process.
Assessing Your Need for a Rollover
Before initiating a rollover, it’s essential to assess whether it’s the right move for you. Evaluate factors such as:
- Your new employment situation.
- Investment options.
- Services provided by your current retirement accounts.
- Services provided by your new retirement account options.
- Fees.
Exploring Destination Options
If you decide on a rollover, your next step is to decide where you want the money to go. You can roll your money into a new employer’s 401(k) plan or an individual retirement account, better known as an IRA. Consider the advantages and disadvantages of each option. For instance, an IRA typically offers broader investment choices compared to an employer-sponsored plan, providing you with more control over your investments.
Understanding Rollover Types
Rollovers can be direct or indirect:
- A direct rollover involves transferring funds directly from one retirement account to another, minimizing the risk of tax consequences and penalties.
- An indirect rollover requires you to receive a distribution check, which must be deposited into a new retirement account within 60 days to avoid taxes and penalties.
Navigating Rollover Paperwork
Once you establish how your money will be distributed and have determined the destination of your money, you can then start your rollover.
Talk with your 401(k) plan provider and ask for any rollover paperwork you might need to complete. This may include distribution forms, rollover authorization documents, and beneficiary designation forms. Pay close attention to deadlines and required information to prevent delays in processing your rollover. Then cross your t’s, dot your i’s, and make sure that everything is filled out correctly.
Monitoring Your Rollover
Once your rollover is complete, continue to monitor your new retirement account regularly. Review account statements, investment performance, and fees to ensure that your retirement savings remain on track.
You may also want to consider rebalancing your portfolio periodically to maintain an appropriate asset allocation and adjust your investment strategy as needed based on changes in your financial situation or market conditions.
And there you have it. Rolling over your 401(k) doesn’t have to feel like a challenge. But if you start the process and run into roadblocks, don’t hesitate to reach out to our team of financial advisors – we can talk through any questions you might have to make sure you feel at ease with every aspect of your retirement planning. Schedule a complimentary call using the link below.