Performing A 401k Rollover

If you’ve tried to look around online regarding 401k accounts, one of the most common phrases that you saw is 401k rollover. You may have tried to read about it, but due to the various unfamiliar terms used, you ended up even more confused. To sum it all up, a rollover is when you move your retirement fund somewhere else. Although your 401k account is owned by you, you don’t control it. Contributing to your company’s 401k plan is actually putting your money in a trust. You as the contributor have an account in the trust, but it is your employer who manages the trust in your behalf. Once you leave your employer, they will either charge you a fee for managing your trust for you or you would have to transfer it elsewhere.

There are several ways of doing a rollover, and one of the most popular is rolling over your retirement funds to an IRA. An IRA or Individual Retirement Account works by keeping your retirement funds for you once you’ve resigned from your company. You can also open this type of account if you are self-employed and would like to have somewhere to save up for your retirement.

Transferring your fund is quite easy. You start by filling out a form informing your employer that you would like to transfer your retirement funds. Your employer will forward this to the plan trustee, who will then start the process to execute the requested transfer.

If everything goes okay, your funds will be released to your new plan. If this new plan is one from your new company, then you would also need to fill out a form asking them to accept your funds and to put it on a plan under them. This process can take anywhere from weeks to a few months, so make sure that you fill out the forms completely. One of the most common mistakes that would delay the transfer is not completely filling out the forms, or filling them out with the wrong information.

One more thing, ask your new company first if they even accept rollovers before you do any steps. Not all plans accept transfers, and you may be left with nowhere to put your money once you’ve pulled it out of your former employers.  If this is the case, chances are the money will be sent to you through a check, instead of having it transferred to another account immediately. If this happens, remember to open an IRA and deposit the check there within 60 days. Not doing so might subject you to penalties and taxes, and you might end up having to start with a new 401k account all over again.

Categorized | Retirement

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