When leaving a company, many employees consider a 401k rollover. Although it might be tempting to cash out a retirement plan to pay for existing expenses, penalties are steep (usually 10% or more of the retirement account balance). Choosing the right fund manager and understanding what to expect during a retirement 401k rollover can simplify the process.
Select a Fund Manager
When leaving an employer, the 401k plan holder needs to shop for a new financial institution or brokerage firm to manage their investment dollars. Consider using online rate comparison tools such as Bankrate.com. These tools allow account holders to compare retirement accounts providers across the country to determine which companies is the best fit.
Handle the Required Paperwork
Once a fund manager has been chosen, they will require that the account holder complete 401k rollover paperwork. On the paperwork, the individual will need to provide information about the current plan provider, fund account number and a formal authorization. According to the Patriot Act, the plan holder will also need to provide their legal name, current address and birth date. The formal authorization will allow the new plan administer to request the funds be dispersed to the new retirement account.
When filling out paperwork, make sure to complete all fields. If the account holder has questions, they should contact the new plan administer. The financial institution or brokerage firm can help clear up questions and complete the paperwork accurately. After reviewing the paperwork, the new institution will review the forms thoroughly and send them back if areas need clarification or are incomplete.
401k Rules and Regulations
Each 401k plan has their own set of rules and regulations. For example, some might charge a wiring fee to disperse funds to another financial institution. Contact the existing plan administrator to determine their requirements and restrictions.
After the paperwork has been completed, monitor the new account closely. Although it doesn’t happen often, if there are errors in the paperwork, it might delay the wiring of funds. In most cases, fund transfers will be complete within 60 days. If the transaction is taking longer, contact the previous 401k provider to determine the issue.
Choosing a 401k rollover instead of withdrawing early from a 401k plan is a wise choice. The account holder will continue building their nest egg for the retirement years. Understanding what to expect and choosing the right financial institution to handle the transaction will make the process much smoother. Over time, plan holders can build a retirement account that meets their retirement goals.
Nicki Howell - Nicki graduated with a Bachelor of Science Degree in Business Administration Marketing. Upon graduation, she launched a career in ...
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