-
Step 1
Those that cash out your 401K plans after leaving an employer are making a big mistake. If you are under 59 ½, money taken out from 401K is subjected to a 10% penalty plus taxes. This is a lot of money that you are losing. For those that already have another job lined up, it is better to rollover your current 401K into the new one (if the employer provides one).
-
Step 2
A direct 401k rollover is the best approach here. It can get the funds from your old 401K and rollover into the new one. There are not penalties or taxes associated with the move.
-
Step 3
Upon termination with your old employer, contact the 401K provider asking about 401K rollover to your new employer. You should ask them about fees associated with the rollover. A rollover can only be done once you are terminated from employment. Ask them to send you all the forms for a rollover.
-
Step 4
Contact your new employer’s 401K provider for information on rollover. Tell them the type of 401K that you have at your old employer and see if a rollover is acceptable. For example, a pre-taxed dollar 401K plan cannot be rollover into a Roth account of any type. After that they verified that is acceptable for the transfer, ask them for all the form associated with the 401k rollover.
-
Step 5
Complete all forms properly and correctly. If you have any questions on how to fill out the form, ask either your old 401K provider or the new 401K provider for instructions. Any mistake in completing the form can cost you lots of time and effort to fix. Submit all forms and check periodically at your new 401K plan to see if funds are transferred or not.
