How to Rollover a 401k to an IRA

Typically, when you leave a company for any particular reason (either retirement, layoffs, firings, or simply changing jobs), you have a 401k to deal with. Initially, you have three different options in regards to your 401k. The first is to just leave it with the company plan. While you might not be with the business any longer, it doesn't mean you are going to lose your retirement plan. However, you might feel safer not having your 401k with the business any longer, in which case you might consider cashing it out. Should you cash out your 401k you might be hit with a rather large 10% fee of doing so. Unless you are really strapped for cash, you probably don't want to do this. That leaves you with the third option: rollover your 401k to an IRA. This is potentially the best option for you, and, thankfully, it really isn't that difficult to do on your own.

Determine the IRA Account

When you are ready to rollover, you want to first locate an IRA that you wish to transfer the 401k into. There are different IRAs available, so you do need to do a bit of homework. If you have a current IRA, you might as well just roll over into this account, but be sure to talk to your financial advisor to make sure there are no hidden fees for transferring your account. If you do need to open a new IRA, you need to determine if you want a traditional IRA or a Roth IRA. It is easier to roll a traditional 401k into a traditional IRA and a Roth 401k into a Roth IRA. Once you have done this, you can then transfer the traditional into the Roth account, or the Roth into the traditional account, whichever works best for you.


If you already have an IRA provider, you just need to inform them that you want to rollover your current 401k to your IRA. When you do this, you just have to fill out some short paperwork, and then everything should be transferred. If you are opening a new account, make sure to select "Rollover IRA" while filling out the initial paperwork as the account type. If this is not a specific option, select "IRA" and then write in "rollover" as the funding method.


Now that you have the money in the account, you need to determine how to continue your investments. Your new IRA provider will contact your former 401k provider to perform the transaction, although this might take a few days to complete. Once you have your IRA open, you are now able to determine how you wish to invest and what money you want to place into the account. Either way, you have some exceptional options to invest with and can stay on top of your retirement account rather easily.