When you change jobs, you might wonder what to do with your 401(k) account. One option is to roll it over to an IRA. Making a direct transfer is your wisest choice, as it allows you to sidestep any question of tax liability and any worry over timing of the transfer. If you do elect to take a distribution from the 401(k) and deposit it to the IRA yourself, be sure to complete the transaction within 60 days.
Contact your 401(k) plan administrator and say you want to make a direct transfer to an IRA. You'll likely need to fill out a distribution form with your name, address and 401(k) account number, as well providing the institution name and account number of the IRA you are transferring the money into.
Sign the forms and deliver them to the plan administrator. If there are any fees required, the administrator will let you know.
Check with the IRA trustee to be sure the transaction was completed.
- Some banks and brokerages that offer IRAs require that you fill out a form letting the institution know that a transfer from another account is to be expected. If this is the case, provide the name and identifying information of the 401(k) institution to the IRA trustee in advance of the transfer.
- You can also choose to have the 401(k) trustee disburse the funds directly to you. However, the trustee will automatically withhold 20 percent of the withdrawal amount for federal taxes, and you will have to make up that 20 percent with funds of your own for transfer to the IRA. In addition, you have to put the 401(k) money into the IRA within 60 days of receiving it. If you do not, the Internal Revenue Service sees the transaction as a distribution and you will face tax liabilities.
D. Laverne O'Neal, an Ivy League graduate, published her first article in 1997. A former theater, dance and music critic for such publications as the "Oakland Tribune" and Gannett Newspapers, she started her Web-writing career during the dot-com heyday. O'Neal also translates and edits French and Spanish. Her strongest interests are the performing arts, design, food, health, personal finance and personal growth.