How To Rollover Your 401(k)/403(b) When You Leave Or Lose Your Job

If you are planning to leave your job or have recently left or lost your job where you had a 401(k) or 403(b), you have several options available to those funds. Avoid unnecessary losses and penalties by opting for a 401(k) or 403(b) rollover.

Rolling over your 401(k) or 403(b) allows you to transfer your existing retirement account into another retirement account without being subject to unnecessary taxes or withdrawal penalties. 401(k) and 403(b) accounts are funded with pre-tax dollars and grow tax-deferred. If you take an early distribution, the IRS will penalize you by taxing you 20% on the early withdrawal as well as apply an additional 10% penalty if you withdraw the money prior to age 59 1/2. Many people fall into this tax trap simply because they don't know how to do a rollover.

Rolling over your existing 401(k) or 403(b) account into a safe money vehicle will allow you to avoid paying the taxes and penalties you would be subject to if you took the money out in cash.

Rolling over your existing 401(k) or 403(b) into a safe money vehicle gives you:

*Safety: Unlike insecure mutual funds, stocks and bonds - safe money vehicles can guarantee upside potential by providing you with safety from the risk of market downturn and a guaranteed lifetime stream of income. Your principal is guaranteed unlike the insecure market where there are no guarantees.

*Investment options: There are numerous investment choices to choose from including indices such as the S&P 500, NASDAQ, Dow Jones Industrial Average, etc. There are also fixed interest rate accounts available that are considerably higher than in bank CDs. You may also change these options from time to time based on changes in your investment goals or the investment climate.

In addition, there are some programs that will credit you additional interest on top of your initial contribution to your plan.

The rollover process may seem complicated, but really isn't as long as you know the steps involved.

*Check Eligibility With Your Old 401(k) or 403(b) Provider: Make sure there won't be any unexpected fees and make sure that you're showing up as a terminated employee. They can't release the funds unless you're terminated, so be sure you are no longer active in their system. Be sure that you are cleared to move your money and that there are no unexpected penalties, fees, or restrictions.

*Obtain Rollover Forms From Old Plan Provider: As you check your eligibility, ask for the required paperwork. You will need to submit paper forms in order to initiate the rollover. They will either mail you the forms or you can request to have them emailed or faxed to you. There also some providers that only require a rollover request from your new plan.

*Complete the Forms Properly: To be sure this process is as smooth as possible, make sure you fill out the forms correctly. If your rollover form from your old provider asks what type of distribution this is, be sure to choose a Direct Rollover.

In many cases, you will receive a check for the full amount of the rollover in the mail. Make sure you deposit the funds into the new account as soon as possible. By law, you have 60 days from the date of distribution to complete the rollover into a new plan in order to avoid creating a taxable event.

A 401(k) or 403(b) rollover will definitely place you on the right path to achieving your retirement goals.

Remember - investing in your retirement is investing in your future! Be confident in your future!

If you have any questions or know anyone who might need this type of service, please don't hesitate to contact us for a free consultation.
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This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.

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