Changing jobs can be super exciting, but it also means you need to think about important stuff, like your 401k. Your 401k is like a savings account for your retirement, and you want to make sure your money stays safe and continues to grow even when you switch companies. This essay will walk you through the steps of how to transfer your 401k to a new job, so you don’t have to worry about losing your savings.
Understanding Your Options: Rolling Over Your 401k
Okay, so you’re wondering, what happens to your 401k when you leave your job? Well, you have a few options, but the most common one is called a “rollover.”
A rollover means you move your money from your old 401k to a new retirement account. This can be your new employer’s 401k plan, or another type of retirement account like an Individual Retirement Account (IRA). The main reason people do this is to keep their money growing tax-deferred, which means you don’t pay taxes on the earnings until you start taking the money out in retirement. There are a few different ways to accomplish this, and each has its own set of pros and cons.
So, if you’re asking: What is the most popular choice when moving your 401k?
Rolling over your 401k is the most popular choice.
Gathering Information: Your First Steps
Checking the Details
Before you can do anything, you need to gather some information. Start by getting in touch with the HR department or the plan administrator at your old job. They’ll be able to tell you the specifics of your 401k plan. This includes the name of the plan, your account number, and who to contact.
You’ll also need to find out the exact amount of money you have in your 401k. This is important for knowing how much you’re transferring. Additionally, make sure to know your vesting schedule. Vesting means how long you need to work for the company before you’re 100% entitled to the employer’s contributions to your 401k. If you haven’t been with the company long enough to be fully vested in employer contributions, you might lose some of that money when you leave.
You should also ask about any fees associated with the transfer. Some plans might charge a small fee to process the transfer. This shouldn’t be a deal-breaker, but it’s good to be aware of.
Here is a list of things to remember:
- Contact the HR or plan administrator.
- Get your account number.
- Find out how much money you have.
- Understand your vesting schedule.
- Check for any fees.
Choosing Where to Transfer Your Funds
Deciding the Best Place for Your Savings
You have a couple of main choices for where to roll over your 401k money. The most common is to roll it over into your new employer’s 401k plan. This keeps everything simple, and it’s usually a good option if your new plan has good investment options and low fees.
Alternatively, you can move your money into an IRA. IRAs are individual retirement accounts, and you set them up yourself. IRAs often have a wider range of investment choices, and you might be able to find lower fees. However, it’s important to research different IRA providers and understand the fees and investment options they offer. Also, if you’re doing a Roth IRA, that is taxed upfront, and you can’t roll over a traditional 401k directly to a Roth IRA, unless you pay the taxes on the money.
Finally, you could also leave the money in your old employer’s 401k, but only if the plan allows it. They might let you keep your money there until you decide what to do with it. This is a simpler choice, but the main disadvantage is if you don’t like their available investments.
Here are some of the choices available:
- New Employer’s 401k
- Individual Retirement Account (IRA)
- Leave it in the old plan
Initiating the Transfer: The Paperwork Process
Getting the Ball Rolling
Once you’ve decided where you want to transfer your money, it’s time to start the paperwork. This can seem a bit intimidating, but it’s usually pretty straightforward. You’ll need to contact the financial institution that manages your new retirement account, whether it’s your new employer’s 401k provider or an IRA provider.
They’ll usually give you the necessary forms to fill out. You’ll need to provide information about your old 401k, like your account number and the contact information for the plan administrator. Make sure you fill out everything correctly and completely, so there are no delays. The forms are sent to the old plan provider, and then the funds will be transferred directly to your new account.
The process can take a few weeks. So be patient, and check in with the new plan administrator and the old plan administrator to follow up, and make sure everything is moving along. Also, be sure to confirm that the money has arrived safely in your new account and the number matches what you had.
Here is a general outline of the process:
| Step | Description |
|---|---|
| 1 | Contact New Provider |
| 2 | Fill out Forms |
| 3 | Provide information about old 401k |
| 4 | Old plan will transfer funds |
| 5 | Confirm funds arrive |
Finalizing the Transfer and Beyond
Making It Official
Once the transfer is complete, make sure to review your new retirement account statements. Double-check that the amount transferred matches what you expected. It’s also a good idea to review your investment choices and make sure your money is invested in a way that aligns with your goals and risk tolerance. If you’re not sure about investments, consider getting help from a financial advisor.
After the transfer is complete, remember to keep your contact information up to date with your new retirement account provider. This includes your address, phone number, and email. This will ensure that you receive important updates and statements. Remember, you should also keep track of all the paperwork related to the transfer, just in case you need it for your records.
Keep in mind that this is a one-time process. But, there might come a time when you may need to transfer your 401k funds again. Finally, make sure to review your retirement savings plan at least once a year, or whenever you experience significant life changes.
Some of the things to do after you complete a rollover:
- Review Your Investment Choices
- Keep contact information up-to-date
- Keep track of all of the paperwork
- Review your retirement savings plan regularly
Transferring your 401k can seem confusing, but by following these steps, you can make the process go smoothly. Remember to gather information, choose the right account, and complete the paperwork carefully. Keeping track of your retirement savings is a crucial part of planning for your future, and now you know how to handle it when you move to a new job. Good luck!