S2E1: How Do I Take Over My Retirement Account? (401k, 403b, etc..)

Season #2

What should you do with the 401k, when you're ready to retire? Which forms do I need to fill out in order to do a "rollover?" When should you start planning your rollover?

What should you do with the 401k, when you're ready to retire?

Now that you are retired or have left your job, you have two choices for your 401k.

Option one is to keep your money with your employer. This option lets you keep your money invested, but you might not have as much control over it and might not have as much access to it.

Option two is to take the money over and manage it yourself. This option gives you more control over your money. You can use a rollover to transfer your 401k into an individual retirement account. With the individual retirement account or IRA, you will be able to manage it yourself, just like you do with other accounts like a brokerage account or bank account.

When you take over your 401k accounts, there are some things you need to remember.

First of all, it is very easy to transfer your money to a bank or brokerage firm. They will make it very easy for you. So don't worry about the paperwork you have to fill out. There are even firms that specialize in transferring the accounts for you,.

Second, when you transfer your 401k to a new bank, you need to make sure that the money is sent directly from the old bank to the new bank. This is called a custodian to custodian transfer.

You don't want the check to come to you, and then you deposit it in the new bank because if it's done directly from bank to bank, there are no tax withholdings. There is no potential tax penalty. However, if it comes to you and you get a check, and then you deposit that check, there is an opportunity for it to intentionally be considered a distribution and not a transfer. In fact, you have 60-days to complete the transfer, and the IRS requires your 401k company to withhold 20% of the distribution when you request your funds this way. So, always request a custodian to custodian transfer whenever possible.

Any financial advisor, any firm that's working with you to do this rollover will probably make sure and be on top of it to make sure it's done right.

Which forms do I need to fill out in order to do a "rollover?"

Every bank you're transferring money to will have its own forms. Your 401k company will also have its own set of forms. Each 401k company is different because they can make their own rules. So your friend may do it one way and you may have to do it a completely different way because your plan is administered differently and has different rules under the department of labor guidelines.

What you need to know is that when you leave your job, you have the right to move your 401k money into a traditional IRA or Roth IRA account. The new bank that you move the funds to will help you transfer the money.

Pre-Tax and After-Tax Retirement Funds...

And if you've got a mixture of pre-tax and after-tax money in your 401k, work with an accountant to do that rollover because it can get a little complicated.

When should you start planning your rollover?

If I know that I'm going to retire and separate from my company on X date, when should we start making plans for the rollovers, and how to make sure our proceeds are managed properly?

Ideally, you would want to start planning this before you actually separate from your company.

If you've already talked to your employer, And, and you're both on friendly terms of when you're gonna be retiring, then probably, six months before you wanna start talking to HR, you wanna start talking to your 401k provider, find out the information you need to know in order to make it happen because 401ks, they move very slowly.

HR moves very slowly. The amount of time it's going to take to figure out what you need to do in order to make it happen. It'll be a lot easier if you're a current employee than a former employee.

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