How To Transfer 401k To New Job? Step By Step Guide

Who wants to lose money? Especially when they have worked hard for it? No one, even when fired from work or leaving a job. 

So, if your previous job offered a retirement plan through a 401k plan, you must use it smartly and not get a single penny wasted. 

But how to transfer 401k to a new job? This question bothers many of the professionals who recently lost their jobs or left one for another. Do not worry; here is your solution. This article outlines simple methods for transferring an old employer’s 401 plan to a new employer’s plan.

How To Transfer 401k To New Job?

Irrespective of whether you are fired or quitting a job, you will make the best use of your 401 k plan. Why lose the money you worked hard for, right? But how to transfer 401k to a new job? If you want to roll over your funds to the 401 k plans of your new employer, then go through the things you will need below –

1. First, you have to contact the administrator of the 401 k plan and ask them to arrange for a rollover. However, you might first need to choose a type of investment you want to do with the money before initiating the rollover. Otherwise, you can transfer the lump sum of the money and gradually allocate the funds to the different investment plans you choose. 
2. You can also complete any plan that the employer requires for processing the rollover. 
3. You have to also request the former plan administrator to send the money through electronic transfer. You can also request them to send it via check. 

However, keep in mind that you may have to wait for the next enrollment period to complete the rollover. You can use this due time to research the investment option for the plan and be ready.

You may like to read: How To Withdraw From 401k? – Best Ways For Cashing Out

401 K Rollover Rules

So, how to transfer 401k to a new job? If you are willing to transfer your 401 k fund to a new employer’s plan, then you must know the different rules involved with it. 

You can do that through direct, indirect, and transfer methods.

Direct 401 K Transfer Rules

The direct transfer method involves trustee-to-trustee or through check. The check is transferred to the financial institution so that you can benefit from it. How? Well, due to the direct deposit of the funds into the account, no taxes are withheld from the fund. 

The trustee-to-trustee transaction happens between the plan administrators, who exchange the funds electronically. 

Indirect 401 K Transfer Rules

However, if you are indirectly transferring the fund to a new employer’s 401k plan, you will have to suffer 20% taxes withheld. You can roll over the fund into a retirement plan or an IRA within 60 days.

However, there is a chance for you to contribute the full amount of the previous 401k plan. But that would require you to add money and bring the lump contribution, making up for the 20% tax paid. This will help you count the same amount you had in your previous employer’s 401k plans. 

Read Also: What Happens To Your 401k When You Leave A Job?

Step-By-Step Guide To Transfer 401k Fund To New Job

Do you choose to roll the funds into an IRA not sponsored by the employer? Then you have to opt for a direct rollover method for the 401 funds. This will process your funds from a previous 401 plan and roll it into a new one. 

If you follow this method, it will prevent the previous lender from sending a check to you, which results in unprecedented withdrawal tax situations. 

Well, it is pretty simple to start a new retirement account. But, if you want to avoid any difficult situations, then I would suggest going through the different tips given below –

Here are some general steps you need to follow –

Choose An IRA Custodian

First, you need to choose the financial institution that will hold the IRA account you create. Some of the most common IRA custodians include banks, brokerage firms, and credit unions.

Open Your IRA Account

Now that you have chosen the custodian for the IRA, you have to create an account. You will be required to provide your personal information, address, Social Security Number, etc. 

Request A 401k Distribution

Now that you have created your IRA account with a custodian of your choice, you are ready to request a 401k distribution. You must reach out to the administrator of the previous employer’s 401k plan and ask them to distribute your fund balance.

Also, you must specify that you want to receive the fund through direct distribution or through a trustee-to-trustee transfer. These are the most straightforward ways to transfer your 401k to a new job.

Provide IRA Custodian Information

After you are done asking for distribution, you have to provide the plan administrator of the old employer with the address, name, and account information related to the IRA custodian. This will let them know where to send the funds. 

Wait For The Fund To Get Transferred

Although you have provided everything needed from your end, the fund’s transformation will require some time. You have to wait for almost a few weeks before the 401K fund is finally transferred to your IRA account. 

Invest The Funds

When the funds are transferred to the IRA account, you will have to invest using the transferred amount. 

However, when going through these processes, ensure to follow all the procedures that your 401k plan administrator suggests. They usually have 60-day rollover rules and more. So, we suggest abiding by these rules if you want to avoid any penalties.

Final Words

You can keep the 401 plan fund with your old employer. Or you can choose to transfer it to the new employer’s plan. However, if you are following the latter suggestion, then enquire if your present employer has a rollover option. But how to transfer 401k to a new job? I hope you have found the answer to that after reading this article. 

But, if you need us to answer more of your queries, then you can read more queries we have solved related to 401k funds. Thanks for reading.

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