One of the most important considerations when changing jobs is what to do with your 401k plan. Making the wrong decision or handling the rollover improperly could cost you tens of thousands of dollars and set your retirement plan back by many years. Rolling the money in your 401k over to an IRA preserves the tax benefits of the plan and lets you keep saving for retirement. The rollover takes place when you move the money in the 401k plan directly into the IRA, without cashing in the account.
Review your latest 401k statement to see how much money is in your account, so you know how big the rollover will be. The account value shown on your statement will be different than the current value because prices can change every day; get a current value by logging on to your account online.
Contact the fund administrator you want to use for your IRA. If you have an existing IRA, contact that company and let a service representative know you want to transfer a 401k into the plan. If you do not currently have an IRA, start by contacting several large low-cost mutual fund families. Review each plan carefully and evaluate each based on performance and fees.
Obtain an account transfer form from the administrator you want to use for your IRA. Depending on the company, this form might be available online. Complete the form, including the account number of your 401k, your name, your address and your Social Security number. Sign and date the form where indicated.
Make a copy of your latest 401k statement and attach it to the IRA transfer form. Make copies of everything you are submitting, then mail all the paperwork to the address listed on the form. Some IRA custodians can complete this transfer online -- check with the custodian to see if the company provides online access for account transfers. You will need to have your 401k statement handy, since you will need to provide the account number.
Contact the new administrator after a week if you have not received confirmation of the transfer. Check to see where the transfer process stands. It can take a few weeks for the process to be completed, but follow through to make sure it is completed successfully. You have only 60 days to make the transfer and avoid penalties and taxes.
Items you will need
- 401k statement
- Transfer form