Reclaim Your Retirement Savings: How to Rollover a 401K to IRA

April 4, 2023
It's time to reclaim your forgotten your retirement savings and put them into one easy-to-manage account. I'll show you how to rollover a 401K to an IRA.
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Britt & Laurie Anne
Two female investors in their 30s with a collective net wealth of over $6 million+
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Given that the average American switches jobs every 4 years, you may have collected a few 401Ks along your career path and you might be wondering what to do with them all.

Well don’t worry, I’m going to tell you exactly what to do with them (i.e., how to rollover a 401K to an IRA!).

Unfortunately, there are 28 million forgotten 401K accounts out there and more than $1.5 trillion (that’s “trillion” with a “t”) in forgotten 401K assets.

Instead of losing thousands of dollars from forgotten 401Ks, I’m going to help you reclaim your long lost retirement funds and get it back in your hands, where it belongs.  

Retirement Savings Terminology

Before we dive in, let me clear up some terminology…

A 401K or Roth 401K is a tax-advantaged investment account, offered to employees of for-profit companies.

A 403B or 401A is a tax-advantaged retirement account that’s available to employees of non-profit companies.

A 457 is a tax-advantaged retirement account that’s available for governmental and certain non-governmental employees.

I’ll be using the word “401K” since that’s the most common type of retirement account, but know that everything I’m going to say applies to any kind of employer-sponsored retirement account – 403(b)s, 401(a)s, 457s, and so on.

I’m also going to mention something called a “rollover.”

A rollover is the technical term for the money you transfer from one retirement account to another.

Ok, are you ready to save yourself a huge headache and potentially thousands of dollars?  

Leaving Your Job? Here’s What You Can Do with Your Retirement Account…

First off, if you have a retirement account with a former employer, what are your options?

If you leave a job with a 401K, you typically have four options.

These are your options, from least to most attractive:

1) Withdraw or cash it out

Withdrawing your money before retirement age usually means paying significant tax penalties and fees. These plans were designed to help you with your retirement, so taking the money about before retirement age is a huge no-no, and you’re penalized to disincentivize you from doing so. Given the fees and penalties, I don’t recommend this option!

2) Leave it where it is

This may be an option if your ex-employer allows this, but often employers will shut down your 401K once you leave the company.

Assuming your ex-employer allows you to keep your money in their 401K plan, then you don’t need to move it if you like the plan, if you are happy with your investment options, and you’re comfortable with the fees you’re paying.

Quick note - while you were an employee, your employer may have covered the management fees on the account, but they likely aren’t covering the fees anymore, so check your quarterly statements to find out what your current fee is.

The upside of this option is that you don’t need to take any action.

The downside is that you have to remember all the various places your retirement funds are, including this old employer’s 401K.

As a minimalist, I like to keep my money in as few different places as possible, so this wouldn’t be my preferred option.

Let’s talk about two better options.

3) Transfer it into your new employer's 401K plan

Assuming your new employer offers a 401K plan AND allows rollover contributions, then you have the option of rolling your old employer 401K plan to your new employer’s plan.

The upside of doing this is for simplicity — all of your retirement funds can be in one place and managed together.

The two downsides of choosing this option are…

  1. Usually company-sponsored 401Ks charge slightly higher fees than managing it on your own
  2. Your investment options are limited by the options that are included in your new employer’s plan

If you don’t mind the fees and potentially limited investment options, then this is a great option for maintaining a streamlined approach to your retirement accounts.

4) Roll your old 401K into an IRA (individual retirement arrangement)

This is the option that gives you the most control and the most flexibility.

If you’ve moved companies multiple times, then you may have several different 401Ks to keep track of, and it might be nice to have them all in one place.

Since an IRA isn’t tied to an employer, and you manage it yourself, you can consolidate all your old 401Ks into a single place. It also stays with you wherever you go.

More importantly, you have more choices and greater flexibility. YOU are in control of your money. You can evaluate the fees and expense ratios and choose the investments that work best for you, rather than having a handful of funds to choose from in your employer sponsored plan.

And if you’re wondering, rolling over 401Ks does NOT count toward your annual max retirement contribution. So you can consolidate without worrying about limitations.

The only potential downside of moving your 401Ks into an IRA is that – depending on the state you live in – you may lose creditor protection.

Basically, with a 401K, if you’re sued or declare bankruptcy, your retirement savings are completely safe. No one can touch them.

Most rollover IRAs are protected from bankruptcy, but whether or not they’re protected from lawsuits depends on the state you’re in, so if you’re considering doing this, you might want to look into the rules in your state or consult a financial advisor before making a decision.

Now, if you want to rollover your 401K, you want to move it into a compatible account - so if you had a traditional 401K, you want to roll it into a traditional IRA. if you had a Roth 401K, then you want to roll it into a Roth IRA.

Now if you know that this is the option you want to choose, then keep watching, because I’m about to give you a step-by-step tutorial on the easiest way to rollover a 401K.

How to Rollover a 401K

To roll over your 401K, I recommend using Capitalize.

Capitalize is a seamless way to consolidate your retirement accounts. They make the process super easy.

If you watch this video, I walk you through exactly how to do it, starting at 2:23:

Keep in mind that the process will not look the same for everyone because everyone has different companies with different requirements that they’re pulling from.

But the good news is that Capitalize’s database is massive – it has close to 90% of all US companies with 401Ks, so when you enter your former employer, they immediately know exactly what you need to do to rollover your 401K and each process is individualized.

If a form is required, they have it for you. If you need to make a phone call, they will prompt you to schedule a call with them so they can walk you through exactly what you need to say and do.

You can sign up here!

Full disclosure, we do partner with Capitalize and get a small commission if you use the link, but it’s absolutely free for you and could help you find thousands of lost dollars in forgotten 401Ks, so I highly recommend you check it out!

One quick mindset reminder before we go…

While it may seem tedious or not worth it to rollover your old retirement accounts, especially if they don’t have much money in them… by taking this action and putting yourself in charge of your financial future, you are re-writing how you relate to money. You are becoming someone who is responsible, who knows where their money is, and who is advocating for yourself.

Rolling over an old retirement account is one of the easiest things you can do, and it can have a huge impact on how you think about yourself and how you relate to your money.

So, check out Capitalize and take 10 minutes to give yourself greater financial security. Your future self will thank you.

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