How to Complete a 401(k) Rollover When You Get a New Job

You’ve changed jobs — congrats! As you settle into your new role, don’t forget about your retirement account. If you've set up a 401(k) plan at a previous job, you may want to initiate a 401(k) rollover, which transfers the balance of your current retirement plan into a new one.  Consider exploring other options for rolling over your 401(k) to help you meet your financial goals. 401(k) rollovers aren’t complicated, but there are a few actions you can take to make the process easier.

401(k) Rollover Options

There are several places you can directly transfer a 401(k) fund. Here are the most common options.

Traditional IRA

IRAs offer a wide variety of investment options and the possibility of lower fees. A traditional IRA allows you to transfer your existing tax-deferred funds while maintaining their tax-deferred status.

Roth IRA

Transferring funds into a Roth IRA will trigger taxes, because Roth accounts are funded using after-tax dollars. Funds in a Roth IRA grow tax-free and won’t be taxed on withdrawal, provided you wait until at least five years after the conversion and are at least age 59 1/2.

Annuities

An annuity is another tool that can house your retirement dollars until you’re ready to begin using them. One of the biggest perks of annuities is the option to structure your payout to receive income for life. However, annuities do have associated fees. As with an IRA, you’ll need to wait until age 59 1/2 to begin taking payments or you’ll be charged a penalty. Your Farm Bureau agent can help you understand how this option might fit into your overall retirement plan. 

A New 401(k)

Initiating a rollover from your current 401(k) into a new 401(k) account is as simple as completing the right paperwork with your new employer. Opening a new 401(k) can keep your retirement savings in one account, rather than spread across many.

How to Roll Over a 401(k)

1. Find Out if Your Employer Offers a Retirement Fund

First, talk to your human resources contact about the company-sponsored retirement plan. You may already know from your onboarding discussions, but if you don’t, inquire as soon as you can — the majority of companies offer a retirement plan. If yours does, a 401(k) rollover is an easy move to make.

1. Decide Where to Transfer Your 401(k) Rollover

If your new employer doesn’t offer a retirement plan, consider some of the options discussed above. Any distribution would need to be rolled into another retirement account within 60 days to avoid withdrawal taxes and penalties. No matter what destination you choose, asking for a "direct rollover" so the check is sent to your new account, not to you, helps protect you from taxes or penalties that may occur if you don't adhere to that timeline. 

1. Weigh the Pros and Cons of Cashing Out

You might be tempted to cash out your 401(k) to pay off debt or other expenses, but that can be a double hit to your wallet. Though your retirement plan might be worth a lot, you’ll pay hefty taxes and penalties on withdrawals. On top of this, using those funds today could endanger your future retirement.

The exception is if you leave your job between ages 55 and 59 1/2; you could potentially access the balance without penalties. 

1. Reassess Your Financial Goals

A job switch is a great time to reassess your objectives and goals when it comes to your financial big picture. As life changes, so do your and your family’s needs and future goals. Take the time to look at how any changes to your income and benefits may impact your situation or financial decisions  — including around retirement, college saving, estate planning, charitable giving and life insurance. Use the opportunity to make choices that are right for you and your family today. 

1. Assemble the Necessary Account Information

Once you’ve decided to roll over your 401(k) into a new 401(k), IRA or annuity, it’s time to gather information on your accounts. You’ll need current account balances, details of the types of securities in the account and account statements.

1. Follow Your Financial Institution’s Instructions Perfectly

You’ll likely have to sign documents, make some phone calls and fax, email or mail forms to your current and new institution. Follow the instructions well — your money deserves your attention. And be sure to do this within 60 days, or risk being taxed.

1. Explore Additional Retirement Funding Options

A new job is an exciting opportunity, and you want to make sure you’re taking all your hard-earned money with you when you leave. Once your 401(k) is taken care of, it’s a good time to evaluate your overall retirement savings situation. If you’re maxing out your 401(k) contributions, it may be time to look at additional savings options.

Connect with your local Farm Bureau agent for help rolling over your 401(k) or exploring other retirement funding avenues so that when the time comes, you can retire on your own terms.