How to Roll Over a 401k to a Bank IRA
If you recently left a job or decided to change your retirement plan, you may wish to move your retirement funds in your 401k to an individual retirement account. There are two types of IRAs: traditional and Roth. Contributions to traditional IRAs are tax deductible, but funds are taxed when withdrawn. Contributions to Roth IRAs, on the other hand, are not tax deductible, but funds are not taxed when withdrawn as long as the owner has held the account for five years and is over the age of 59 1/2. If you do decide to roll over your funds, make sure you have already established your IRA before moving your 401k into it.
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Instructions
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Check the balance of your 401k. Some investment companies mandate minimum deposits when opening an IRA. In general, you should only move your money if you have at least $500 in the account.
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Research the offerings at investment companies, banks and credit unions for IRA programs. The biggest difference in IRAs is the investment strategy. Banks and credit unions tend to be quite conservative with IRA funds (mutual funds, mostly), while investment banks take more risks. Once you open the account, you will have control over the investment scheme. However, your control only extends as far as the available investment offers at your particular company.
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Narrow the list of potential IRA companies. If you prefer to do banking locally, you might consider a community credit union. If you like to have vast options for investing, an investment bank might be the way to go. The type of holding institution you choose should be based entirely on personal preference.
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Open an IRA. You will need your name, address, Social Security number, phone number, email address and name of current or former employer. Indicate on the application, or to the broker with whom you are opening the account, that the funds from your 401k are to be rolled over.
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Make an electronic rollover. Contact a representative from your new IRA company and give her the account number for your old 401(k) account. On the day you choose, your funds will be withdrawn electronically from your 401k and automatically deposited into your new IRA.
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Make a physical withdrawal if you do not want to transfer your funds automatically. Contact your 401(k) company and request a physical rollover. You will likely need to sign an electronic document authorizing the withdrawal. Have the check mailed to your home.
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Bring the check to your IRA provider. You will need to endorse it in person (with photo ID). Get a deposit slip confirming the deposit into your IRA.
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Tips & Warnings
If you decide to take a physical check from your 401(k), you must deposit the funds into your new IRA within 60 days or you will be subject to severe early withdrawal penalties and taxes.
References
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