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Moving 401(k) assets

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MOVING 401(k) ASSETS

2. 401(k) portability

3. Taking a cash distribution

4. Your former employer's plan

5. Mandatory IRA rollovers

6. Rolling over to a new plan

7. Rolling over to an IRA

8. Direct rollover to an IRA

9. Indirect rollovers

10. Why not a cash distribution?

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Direct rollover to an IRA

When you use a direct rollover, also called a transfer, to move your 401(k) plan assets into an IRA, you avoid paying penalties and taxes on the amount you move because the assets are transferred directly from your former plan to the custodian of your new IRA.

You'll find a wide number of institutions — including banks, brokerages, and mutual fund companies — that can act as your plan custodian. It's a good idea to review a number of different possible custodians, comparing fees, sales charges, and services.

To perform a direct rollover to an IRA:

1. Identify an IRA to roll your assets into. Your old employer's plan probably requires an account number to move assets from your 401(k) directly. If there's a danger your 401(k) will be cashed out due to a low balance, you'll want to set up your account as soon as possible, since it could take a week or more for the IRA custodian to process your application.

2. Complete all the necessary paperwork for your former employer's plan. You'll probably need the account number and address of your IRA custodian, so the plan administrator knows where to send the check.

3. If you prefer to deliver the funds yourself, you can have your former employer's plan administrator make the check out to your IRA custodian but mail the check to you. Then you send the check to its final destination. Otherwise, you can leave the delivery up to the plan administrator.

You may be able to use an electronic transfer for the rollover. If available, this is the easiest option, since there's no need to have a check drawn up and no need to worry about whether the check was received and processed correctly.

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