Steps For Rolling Over 401(k) Into IRA

Sunday, May 1, 2011, 2:00 AM | 2 Comments

A time may come that you are no longer satisfied with the performance your 401(k) retirement account. As we all know, it can be provided only by your employer. It is commonly known as employer-sponsored retirement plan. Because of this dissatisfaction, many people decide to move their money from a 401(k) to an IRA rollover as soon as they leave their job. Some people even elect to rollover eligible 401(k) balances even while they are working for the same organization. By the way, a 401(k) plan is a tax-deferred, defined-contribution retirement plan.

Before you talk to your financial adviser, it would be beneficial to you if you know about the process of rolling over your 401(k) into an IRA with your chosen custodians. Usually uninformed folks let others take care of all the steps in the process without knowing anything about it. They later regret and wish they were more informed. It’s good to trust people involved in the process but not blindly. You must educate yourself about the steps involved.

Basically there are four steps that you have to know about:

  1. Get Information

    You can get information from the following places:

    Employer’s HR department
    Your employer – previous or current – has all the information about your 401(k) options. Call your HR department. Find out what their requirements, if any, are for a direct rollover. Ask who the plan current administrator and / or custodian is. Sometimes the plan administrator is also its custodian but not always.

    Plan administrator
    Talk to your 401(k) plan administrator about the rollover and see if you are eligible for lump sum rollover or perhaps partial. Some company retirement plans have an all or nothing rollover policy so you need to ask.

    Plan custodian
    Ask if you have any balance in a Roth 401(k) or a regular 401(k). If you do have any funds in a Roth 401(k), you will want to do a direct rollover for that balance to a Roth IRA.

  2. Contact your IRA Rollover account custodian

    First off, contact custodian for your IRA Rollover account. Ask if they require anything to accept the direct rollover. Open up your IRA Rollover account. If your 401(k) provider only distributes by check, ask them how they would like the check to be made out for a DIRECT Rollover. Now you should have your new account ready to receive your direct rollover.

  3. Execute the Transfer

    Submit the direct rollover forms and required documentation to the custodian or plan administrator, whichever applies to you. Be sure to provide them with your new IRA Rollover account number. It should be on your check or part of the electronic transfer request.

    It’s important to avoid any receipt of the funds that might trigger an unanticipated tax consequence. The direct rollover typically takes two to six weeks though it can be even longer depending on the responsiveness of your 401(k) provider.

    If you get a check in the mail, make sure

    • The balance is what you had expected,
    • The check was made out correctly,
    • The check should not name you directly but should name the new custodian for your benefit and include the new account number.

    You will have 60 days, including weekend and holidays, from receipt to make the deposit into your new account. Remember to request that your new account number be included on the check or the electronic transfer.

  4. What to do once your Rollover IRA account has received the money

    Contact your old 401(k) custodian and confirm that they show a zero balance for your account. Expect a form 1099-R from your old plan. Hold on to it. Even though you won’t have to pay taxes when the money is transferred this way, you will need to have a proof in case IRS asks for it.

In a Nutshell
You should periodically contact the HR department, the custodian or the administrator to verify the execution progress.


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  1. 2 Responses to “Steps For Rolling Over 401(k) Into IRA”

  2. By cybermagnetik on May 18, 2011, 3:27 pm | Reply

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  3. By Shafi on May 18, 2011, 4:16 pm | Reply

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