Broker Check

401(k) Rollover

As you approach retirement, managing your retirement assets is crucial. And if you're changing jobs or retiring, rolling over your 401k to an IRA can give you more control over how your money is invested.

<b>What is a 401k rollover?</b>

What is a 401k rollover?

A 401k rollover is simply moving your retirement savings from one account to another. You can do this when you change employers or when you decide that your current employer-sponsored plan doesn't have the investment options you want or need.

There are three ways to do a 401k rollover: direct transfer, trustee-to-trustee transfer, and 60-day rollover. The method used will depend on the amount of money being rolled over and the type of account it's going into.

  • A direct transfer is the easiest method of rolling over your 401k funds. This method allows you to move the funds directly from one account to another without the bother of having the money pass through your hands first. For a direct transfer to occur, both accounts must be held at the same financial institution.
  • A trustee-to-trustee transfer involves having both institutions involved contact each other directly so that no money ever passes through you.
  • A 60-day rollover requires the distribution check to be made payable to you or your IRA custodian or trustee, not to you personally. You will then have 60 days from the day you receive it to deposit it into your IRA account before penalties and taxes apply.

401k Rollover Options

If you're in the process of changing jobs—or even if you just want to take a step back and reevaluate your retirement planning strategy—then it's likely that you'll have some decisions to make about your 401(k) plan.

Here are four main options for what to do with the money in your old employer's plan.

1. Leave Your 401(K) With Your Old Employers Plan

This is the simplest option, but it does have some downsides. By leaving it with your old employer, you may miss out on important features like investing in different types of funds or the ability to manage your risk level. And if you change jobs again, you'll have to deal with this all over again!

2. Roll Over the Cash Into an IRA

The individual retirement account is a great way to manage your money on a tax-advantaged basis while being able to choose from a variety of investments and tools to help you grow your savings. Plus, it's easy to roll into other plans when you change jobs again.

3. Roll Over into a New Employer's Plan

If you've got a new job lined up, then rolling over into the new employer's plan can be a good way to stay organized and keep track of all your retirement savings in one place.

4. Cash Out If You Must

If you're low on cash and need some extra spending money, then cashing out might make sense—but remember that you'll be taxed at both federal and state levels, so it's not worth it unless you are faced with a serious emergency.


What is a 401k rollover?

A 401(k) rollover is the process by which an individual can transfer money from his or her employer's 401(k) plan to an IRA account since many 401(k)s allow for this. There are multiple options available to you when considering a rollover, so it is always best to consult with a knowledgeable financial advisor before making a decision. 

What happens if I don't roll over my 401k?

If you don't roll over your 401(k), there are a few things that could happen.

  • First, the IRS will give you an automatic 60-day extension. If you're in a financial pinch and need the money, this is a great option, though it's not the best decision for retirement savings.
  • Your employer might give you the option of keeping the funds in their account. This can be a good choice if you're happy with your current investment options. However, it's not usually a good rule of thumb if you want to keep track of all your assets in one place.
  • Your employer can cut you a check for the full amount and send it to you in the mail. You'll have 60 days from when you receive this check to roll over those funds into an IRA account before taxes and penalties kick in.
  • Taxes and penalties on early withdrawals. If you withdraw funds from your 401k before age 59 ½, then you may have to pay taxes on the withdrawal amount as well as an additional 10 percent tax penalty.

How long do you have to roll over a 401(k) after leaving a job?

After you leave your job, you have up to 60 days to decide what to do with the money in your 401(k).

Once that deadline arrives, though, you'll be stuck paying a tax penalty if you don't roll over your 401(k) into an IRA or other retirement account. You could also be forced to pay income tax on all of the money in your 401(k), depending on how old you are when you leave your job.

Can I move my 401(k) to an IRA without penalty?

To avoid penalties, you'll need to move your money directly from your old 401(k) plan to an IRA or a new employer's plan within 60 days of receiving it. The move must be directly from one custodian to another, so you cannot withdraw the money and deposit it into the new account yourself.

The Future You Want, The Security You Need.

We understand that planning for retirement is a very important part of your financial future. Setting up a retirement plan and choosing the right investments is often one of the most intimidating aspects of saving.

That's why at Dees Wealth, we offer our clients our personalized, hands-on approach to planning. We'll take the time to learn about your unique needs and goals so we can give you the best advice possible on how to get the most out of your investments.

Contact us today for more information.

For more information about our firm and the services we offer, send us a quick email or call the office. We would welcome the opportunity to speak with you. |  (229) 472-8824