It’s natural to be excited or nervous when changing jobs. You’re probably as thrilled as you are wary. And if you’re retiring, it’s the same way. So while saying goodbye to your old job, don’t forget to move the funds from the 401(k) or 403(b).
Because your 401(k) may be a significant portion of your retirement funds, it’s crucial to consider the benefits and drawbacks of each rollover option before making a selection.
Options for an Old 401(k)
When deciding what to do with a 401(k) from a previous employer, there are a few options to consider. You can:
- Rollover your old 401(k) into your new employer’s 401(k) plan
- Rollover your old 401(k) into an individual retirement account (IRA)
- Cash-out your 401(k)
Roll Over Your 401(k) into a New Employer’s 401(k) Plan
You may want to move assets from your old 401(k) to your current employer’s 401(k) plan to keep them all in one place. This will make viewing and monitoring your savings progress much simpler.
If you would like to roll over from one 401(k) to another, contact the plan administrator at your previous employment and inquire if they can perform a direct rollover. A direct rollover means that your old 401(k) plan provider makes a payment directly to your new 401(k) account rather than to you.
They will direct you to complete a rollover request or withdrawal form. Please include the information below on your rollover request to roll your money into your new 401(k) account with Slavic401k:
- Make the check payable to Depository Services
- Include your 10-Digit Account Number
- Include the name of your current employer
- Please mail the check Attention To: Rollovers
- Mail check to Slavic Integrated Administration, 1075 Broken Sound Parkway NW, Suite 100, Boca Raton, Florida 33487-3540
Once we receive the funds you’ve mailed to us, please allow 7-10 business days to process your rollover.
Tax penalties do not generally apply to 401(k) rollovers, as long as the funds are transferred directly from the old account to the new one.
Roll Over the Money into an IRA
A rollover IRA is an IRA that allows you to transfer funds from your former employer-sponsored retirement plan into the account. You may establish the IRA with us, or another financial institution.
The main advantage of converting your 401(k) into an IRA is that you may have increased investment alternatives and, in some instances, lower expenses. If you do a 401(k)-to-IRS transfer, the cash from your old 401(k) must be deposited into the new IRA account within 60 days.
If you are over age 72 when your traditional IRA reaches its minimum distribution age. Then, you will be required to take annual required minimum distributions (RMDs) from the account (but not a Roth IRA).
Cash Out Your 401(k)
Taking money out of retirement accounts should be avoided unless the need for cash is urgent and you have no other options. Depending on your age and tax status, the consequences can be severe. The funds will usually be taxed as ordinary income if you take them from a 401(k) before you reach 59½, plus incur an early withdrawal penalty.
If you must withdraw money before you reach age 59½, consider withdrawing only what you need until other sources of cash can be found. Obviously, this is only feasible if your former employer permits partial withdrawals – or if the account is rolled into an IRA.
Make the Best Decision Based on Your Needs
When it comes to deciding what to do with an old 401(k), there may be factors that could be unique to your situation. That means the best choice will be different for everyone. One thing to remember is that the rules among retirement plans vary, so it’s essential to find out the rules your former employer has and the rules at your new employer.
Do also compare the fees and expenses associated with the accounts you’re considering. If you find it confusing or overwhelming, contact us and we can help answer questions you may have about the rollover process.