How to Rollover a 401(k) into an IRA

A rollover from a 401(k) retirement plan into an IRA can open up new investment options that are unavailable from your current 401(k) custodian. An IRA account can be set up for FDIC insured savings, mutual funds, bonds, stocks and other investments. In just a few steps, you can easily access other investment options by rolling over your 401(k) funds to an IRA.

Difficulty: Moderately Easy

Instructions

1. Terminate employment from the employer of the 401(k) you want to transfer to an IRA.
   If you are still working for the employer of your 401(k), you cannot rollover the funds in that account until you separate service from that employer.

2. Open a rollover IRA account at a financial institution of your choice. While you are opening the account, get the address of the financial institution to which your 401(k) custodian should send your 401(k) funds.

3. Call the financial institution managing your 401(k) and request a rollover. They will verify that you are eligible and then send you a package of rollover forms.

4. Complete the 401(k) rollover forms sent by your 401(k) custodian. In doing so, you will authorize your 401(k) custodian to mail a check directly to the financial institution managing your IRA.

5. Make new investments with your funds once the 401(k) funds arrive in your IRA account. The 401(k) funds will arrive as cash and be invested in a cash investment until you indicate otherwise.

Tips & Warnings

• Make sure to have your funds sent directly to the new financial institution to avoid any tax liability. There may be significant tax consequences if the 401(k) funds are made payable to you.

References

• Schwab Rollover IRA Procedure
• 401k Rollover Information - More Complicated than an IRA Rollover