When it comes to moving your 401(k) balance to another financial institution, you need to know where you would like the funds to go. 

You have two choices:
1. Rollover to an Individual Retirement Account (IRA).
2. Rollover to your new employer’s retirement plan.

Once you have made this decision, you will have to complete two main steps. First, you need to understand what your former employer requires in order to distribute your funds from their 401(k) plan. Second, you will need to establish your new account with either your new employer or with the IRA. Once your new account is set up, then request the distribution from your old 401(k) plan.

Former Employer

Some retirement plan providers allow you to call the company which holds your money and request the distribution over the phone.

WARNING – In many cases, phone representatives will do everything they can to keep your money with them, trying to persuade you to change your mind. Make sure you know exactly what you want to do and inform them that you have already established the account to which the funds will be transferred. The other common option is that employers will give you their distribution paperwork for you to complete. It is important for you to know whether your distribution will be mailed to your home or mailed directly to the institution you are rolling your money to.

New Employer’s Retirement Plan

In many cases, you will already have an account established but check with your human resources department to request any rollover paperwork you may need. Let them know you want to rollover money into your retirement plan with them.

IMPORTANT – If you have a waiting period before you can begin contributing, you can, in most cases, still rollover your money into the plan even though you are not yet eligible to contribute.

Individual Retirement Account

Complete the necessary forms with the IRA provider to establish your account. Once the account is established, then request the distribution from your former employer’s retirement plan. You always want the distribution check to be made payable to the institution you established your account with and NOT made payable to you. This will allow the funds to be considered a “direct” rollover in which you will have no tax consequences.

To make this process go smoothly, learn what is needed from the old employer and either the IRA or new employer plan. It is important that you check up with the former employer or new provider if you see no action occurring within a period of two to three weeks.