Here are 3 easy steps explaining how to rollover your 401k into an IRA

You just changed jobs… or lost your job… or retired?

You have investments at your previous employer, in your 401k account.

Technically you have funds that have had investments in them and are transferring them to another account. 401k’s and IRAs are taxed the same and you are allowed to move funds from one to the other. There is a reason I recommend you do the steps in order when doing a 401k rollover to IRA. If you try doing step #2 first then you do not have anywhere for the funds to go and they will try to do an indirect rollover which could cause a tax liability when done incorrectly.

I have outlined how to rollover your 401k into an IRA in 3 easy steps below.

3 STEPS to accomplish a 401k rollover to IRA.

1. Open an IRA account (Sometimes there is a “Rollover IRA” account)

* Lots of different custodian options – you can do some research as to which would suite you best but you can always move your IRA to a different custodian later if you find out that you don’t like the one you chose at first. This does not have to be a permanent decision 🙂

* You may be able to skip this step all together if you decide to use a financial advisor to help with the 401k rollover to ira because they will have a custodian that they like to work with and you should contact them first if you plan to use an advisor.

* Most custodians will ask you how you plan on funding it and will walk you through the process of a rollover. They may have an address for your current 401k provider to mail the check too.

2. Contact your 401k provider and let them know you want to rollover your funds to an IRA. They may have forms for you to sign or will give directions for you to accomplish it yourself online.

* You want to make sure you are doing a “Direct Rollover” which basically means you never come in contact with the money. They send the 401k money directly to your new IRA account you recently setup.

* Your investment will likely need to be liquidated into cash so a check can be sent. So you may need to wait a few days before it is ready to send.

3. Periodically check your new IRA account, when you see the funds available then you are able to purchase your investments… Stocks, bonds, mutual funds, rtfs, options, etc.

Hope this is helpful to you and you now have a better understanding of how to rollover your 401k into an IRA.

I am unable to be more specific with how to make the transfer as each 401k provider will have a little different way of doing things, that is why Step #2 is to contact your old 401k provider and ask them for the steps needed to make the transfer….(read more)

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