How to Transfer a 401(k) to a New Job

A 401(k) plan is a tax-advantaged retirement savings account many employers offer their employees. When you change jobs, you can roll over your 401(k) savings to your new employer’s plan or into an individual retirement account (IRA).

A rollover involves transferring your retirement savings directly from one retirement account to another without taxes or penalties. This process helps you maintain the tax-deferred status of your savings, so your balance can keep growing until you retire.

After landing a new job, you could leave your 401(k) with your old company if the plan administrator allows it.

Leaving your 401(k) at your previous employer might be smart if your old plan has low fees and you like the investment options. However, a drawback is that your old employer might charge you additional fees. Review your plan details if you’re concerned about potential fees.

Contact your former employer’s human resource team if you need help finding your old 401(k). This step ensures you still have access to the same plan, as employers sometimes switch 401(k) plan providers or roll old employee’s funds into an IRA on their behalf.

You can also choose from one of these options:

• Roll over a 401(k) into your new employer’s plan. If your new job offers a 401(k) plan and you like its cost and features, you can transfer your old retirement account’s balance into it.
• Roll over a 401(k) into an individual retirement account (IRA). If you’re not satisfied with your new employer’s plan or they don’t offer one, you could roll your 401(k) into an IRA. This option allows you to open an IRA with a brokerage firm that could offer lower fees and access to more investment choices.
• Cash out early. You might also decide to withdraw the money after weighing the pros and cons of cashing out your 401(k). Doing so can provide you with money to cover current expenses, but you’ll pay a 10% early withdrawal fee and income taxes if you’re not at least 59 and 1/2 years old.¹

How to roll over a 401(k) into your new employer’s plan

Transferring your 401(k) to your new job’s plan can be straightforward. Just follow these simple steps:

1. Contact the plan administrator. Contact your old plan administrator to see what steps you need to take to start the rollover process.
2. Complete paperwork. Send over any paperwork the plan administrator requests to authorize the transfer.
3. Request that your former plan administrator send the funds directly. Ask your old plan administrator to send the funds directly to your new 401(k) or IRA. This method is the easiest way to transfer your funds and can help you avoid penalties.¹

How to roll over your 401(k) into an IRA

If you want to transfer your 401(k) to an IRA, the process is almost idential to rolling it into a new 401(k) plan. However, one key difference is that if you want to roll over the funds to an IRA, you’ll need to open a rollover IRA first – if you don’t already have one.

Once completed, contact your old plan’s administrator to complete the necessary paperwork to transfer funds to your IRA.

60-day rollover option

You could also do a 60-day rollover, which involves withdrawing the money from your old 401(k) and transferring it into your checking or savings account. Once you’ve transferred the money, you have 60 days to deposit it into a new IRA.

This option has some drawbacks. For example, taxes are taken out of the withdrawn amount, so you have to deposit extra funds to transfer the total balance of your old 401(k). Plus, if you don’t transfer the balance within 60 days, you might have to pay an early withdrawal penalty.^2,3

Choosing to roll over your 401(k) can offer several benefits:

• Consolidating your retirement accounts in one place. Having one account can simplify tracking and managing your investments.
• A streamlined investment strategy. With all your funds in one place, developing your retirement investment strategy can be simpler.
• Access to financial service offerings. Some plans offer a broader range of investment options and benefits like a free financial plan.

While transferring your 401(k) can offer advantages, there are some potential downsides to consider:

• Loss of certain investment options. Your new 401(k) plan might not offer the same investment options as your old one.
• Increased fees. Some plans have higher administrative costs or investment fees.
• Delays. The transfer process can take time, temporarily affecting your investment strategy.

Deciding what to do with your old 401(k) when you change roles might take some time. Rolling it over into an IRA or new 401(k) plan with your current employer can simplify the management of your retirement accounts. If you need help choosing the best option, contact a certified financial planner or financial advisor.

It’s never too early to start planning for retirement – here’s how you can start saving for retirement in your 20s and 30s.