401k Transfer

Cirira

I recently left the company I've been at for 7 years. I had a 401k through them via New York Life worth around $40k. I've gotten the paperwork to transfer the balance to another 401k but I'm not sure where to start researching this. Does anyone have any helpful tips or links for transferring a 401k? My current job is contract work so I don't have a company 401k to transfer the funds to at this time.

Any help would be greatly appreciated.

Six

What you want to do is roll it over into another account, preferably an IRA (Roth or traditional depending on your original 401(k)/whether you want to convert your assets right now).

As for where to open an account, that's up to you. Vanguard is very popular because of their low fees and excellent selection of funds. Wherever you decide to open the account, they'll be happy to help you with the process. It's relatively straightforward.

Darkewolfe

Often times you can keep your previous 401k as is and just start contributing to your next retirement funding. This is not a terrible thing, as it further diversifies your investments, though it can be a pain to manage. Do you have a specific reason you want to roll it over?

ASimPerson

You want to roll it over because most 401k administrators charge comparatively high fees and have a limited selection of funds.

When I left my previous gig, there was basically zero reason to keep the funds with my old 401k. I rolled them over to Vanguard. It was a bit clunky since my old 401k actually sent me a check when I then had to mail to Vanguard, but the steps are easy. 1) Open the destination account. 2) Get the info for that account. 3) Call your old plan's administrator and tell them you want to roll the funds into a new account.

Mayabird

An IRA can be good to have because it's somewhere you can consolidate funds instead of getting them scattered at eight different 401ks or 403bs. A little diversification can be good but too much is just a pain and you can lose track of stuff. Also you can put in your own contributions instead of only having it payroll deducted.

Just make sure to check both ends for what both administrators (old and new) require, because there's no coordination or standardization amongst the financial industry and every company has its own special stupid little rules.

Thundyrkatz

401k's are employer sponsored plans. So the only way you could have a new and different one to roll the old one into is if the current employer offers one.

As said before depending on if you have a traditional 401k or a ROTH 401k, you should be transferring the assets to an IRA or ROTH IRA. You can go into a ROTH IRA even if the 401k was not a ROTH 401k, but you will have to pay the taxes first.

You can contact the provider for the IRA, any of the big names are fine. The will send you some paperwork to sign and will then do all the footwork to transition the account from the 401k to the IRA.

This should be done as a direct transfer and not a roll over. The reason is that if you cash out your 401k and get a check and then deposit the assets into an IRA within 60 days the 401k Provider will be required to withhold 20% for taxes and 10% for a penalty. You will be able to recover this when you file your taxes, but you will lose the compounding in the mean time, and may run into issues with maximum contribution limits for the subsequent contribution after you get your refund.

Cirira

Thanks everyone. My current company does not have a plan since I'm a contract worker currently. My old plan was through New York Life so I may investigate with them or check with Vanguard.

Mayabird

Thundyrkatz wrote: »

This should be done as a direct transfer and not a roll over. The reason is that if you cash out your 401k and get a check and then deposit the assets into an IRA within 60 days the 401k Provider will be required to withhold 20% for taxes and 10% for a penalty. You will be able to recover this when you file your taxes, but you will lose the compounding in the mean time, and may run into issues with maximum contribution limits for the subsequent contribution after you get your refund.

Also in order to actually be reimbursed for all those taxes, you would need to cover them out of pocket so the full amount that was taken out of the account is put back into another account. If you just roll over the funds that you received minus those taxes, those taxes will still count as a withdrawn amount so there will still be taxes and penalties on that amount so you won't be able to get everything back.

Indirect rollovers like that are a serious pain and a half. Direct transfers are superior.

Thundyrkatz

Oh that's an extremely important detail I overlooked! Thank you Mayabird!