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Follow These 5 Steps to Rollover Your 401k Like an Expert

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After five years of experience leading a TPA call center in North Carolina, Andrew decided to move west to explore parts unknown and follow his passion of helping others. Walking through the doors of Ubiquity Retirement + Savings, formerly The Online 401(k) for the first time, he knew he’d found something special. Continuing to delight clients and partners alike and 10 years later, Andrew has been able to develop new teams, co-found a non-profit of strategic alliances, co-produce a hard-hitting documentary about the looming retirement crisis, and still had time to spread the savings gospel far and wide. Using social media and actual media alike (Wall Street Journal, Fox Business, PlanSponsor, and more), you’ll find no one who likes talking retirement more than this guy!

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February 24, 2016 at 8:00 am
Personal Finance

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Congrats! You’ve got a new job, your desk is packed, and you’re ready to fully embrace a new chapter in life. But are you leaving something behind – your 401(k)?

Here is your step-by-step guide to rolling over your plan:

 

1. Check if Your New Employer Has a Retirement Plan.

Even if they’ve got one, there are a handful of plans that don’t allow you to rollover funds from an old plan. If your new job offers a 401(k) that accepts rollovers, you’re safe to move on to the next step!

 

2. Get Documents From Your Old 401(k) Plan and Start Contributing to the New!

Contact your previous employer and get the necessary documentation that says what you want to do with the money from your old plan, such as move it to your new plan, keep it in place or roll it over into an Individual Retirement Account (IRA).

NOTE! If you rollover your funds directly to another plan, you won’t be taxed. If you take a direct distribution, taxes will be assessed and you’ll also be hit with a 10 percent penalty for withdrawing money prior to retirement.

Take your time to consider the implications of the move – oftentimes you’ll experience a lot of jargon such as plan sponsor, trustee and tax implications, so make sure you understand everything before filling it out.

 

3. Keep an Eye Out for the Check.

If you requested a rollover or direct distribution of your old 401(k), a check will be mailed to you. Who the check is made out to is very important.

If you requested a rollover, the check should be made out to your new plan custodian (for example, Ubiquity uses Charles Schwab, Matrix and TD Ameritrade). The custodian is the entity that holds your money until you retire. If the check is in your name and you requested a rollover, something went wrong and you need to contact your old employer’s plan custodian immediately.

If you requested a direct distribution and receive the check in your name but are reconsidering rolling the money to the new plan, there’s good news! As long as you don’t deposit the check, you have time to decide if you’d rather it go toward another 401(k) instead of taking the direct distribution and incurring the fees and taxes associated with that decision.

NOTE! A retirement plan provider (like Ubiquity) is simply an intermediary during this process. The plan provider does not cut the check. While you can contact your plan provider for help during this process, including to ask about the status of the check, their role is limited to forwarding your inquiry along to the custodian.

 

4. Alert Your New Employer About the Rollover.

After you have the check – and it’s made out to your new plan’s custodian – talk to your new employer and update the appropriate person about the status of the rollover. Your new plan provider needs to be notified by your employer that the rollover money will be hitting your account. If they don’t know, then the new plan won’t look for money and that deposit will not be approved.

NOTE! That check you received then needs to be mailed to the new custodian. You can either handle that yourself or ask your employer to take care of it.

 

5. Make Changes to Plan Investments if You Choose!

 Your new rollover money is like a fresh start – choose new funds, contributions, whatever you want!

Rolling over your 401(k) is important because you don’t want to lose momentum saving or jeopardize compound interest. As long as you follow this checklist, you’ll stay on track to reach your retirement dreams.