3 Simple Steps to Rolling Over a 401k into an IRA
Need to roll over a 401k from your former employer? Here are 3 simple steps to rolling over a 401k into an IRA:
1. Decide which type of IRA you want
These are a few questions that will help you decide which type of IRA you should rollover into.
Do you have an existing IRA? If so, you can just roll your 401(k) assets into your existing IRA. However, make sure to check that there aren’t any hidden charges and fees for doing so.
Do you need to set up a new IRA? You’ll need to decide whether you want to set up a Roth IRA or Traditional IRA. Generally, it is easiest to roll a regular 401k (the kind most of us have) into a traditional IRA. If you have a Roth 401k it will be easiest to rollover into a Roth IRA. Rolling over a traditional 401k into a Roth IRA is a bit more complicated and since 401k contributions are tax deductible it will tax implications that you will need to consider.
2. Tell your IRA provider (current or new) that you want to roll your 401k assets to an account with them
If you have an existing account: You will have to fill out an online from or an old fashioned paper “account transfer form” or you can call the IRA provider and make them do it. Make sure to have your 401(k) paperwork ready (that means account numbers and stuff).
If you are opening a new account: You can open a new IRA by selecting “Rollover IRA” as the account type. If this is not an option, you may need to choose “IRA” as the account type and then “rollover” as the funding source. Or, again you can call Chuck and make him walk you through it.
Your IRA provider will contact your 401(k) provider and execute the transaction. It may take a few days to process, but soon your account will be opened and your assets transferred. Your 401(k) no longer exists and your IRA will be completely under your investment control.
3. Decide how to invest
Once your 401k is rolled over into an IRA your work isn’t over. Now you need to think about how to invest your funds. It’s a great time to reevaluate your asset allocation and rebalance your portfolio. Now that you are freed from the shackles of your old 401k, look at low cost index funds and etfs that fit your investment goals.
