401k Rollover Answers

You know, here at 401k Rollover Answers we’re starting to get some email questions about these technical issues and I love that! It means that people want more than the basics.

Sometimes money issues can get really tangled. People can bring a lot of baggage to their finances. You can think about how you’re not saving enough or not making enough or that your funds are under performing. All these thoughts can swirl around in your head and they can derail you at best and shut you down at worst. Here’s how to combat all of this. Let’s look inside an account and break it down to its parts. It’s not scary; in fact, it’s very logical.

First, you have your 401k retirement account. You move to another job and you bring your 401k along. That 401k  rollover account will sit for awhile with the old company. Why? Because the matching funds have to be calculated and the company generally will only do that bi-annually.

Doing the work to calculate the matching fund contributions for each and every 401k account takes some serious computing. The fund manager is only going to do that when he or she has to. Or, better said, the company that pays the fund manager is only going to incur that expense when they need to. So, depending on your timing, your 401k rollover could take months to finalize. This is nothing to sweat. 401k rollovers happen everyday.

So, your old 401k sits in stasis. Sort of. It will still be active and earning or (of course) losing money — depending on the market. A 401k plan rollover does not prevent you from opening a new 401k account at your new job. Go ahead and get those contributions flowing into a new account. You don’t have to wait and you shouldn’t wait! When the time comes, the 401k rollover money will tip into your new account and it will be a surge of fresh energy as the account swells with the additional cash.

The 401k rollover account does not care where you put it once it’s ready to move. That’s great news. It means that you can decide to move the money into an IRA instead of a company-sponsored 401k plan. A 401k rollover/Roth or or a 401k rollover/IRA works the same exact way as any rollover. When you have made the decision to move the money to either a traditional IRA or to a Roth IRA, your first step will be to open that type of account at a brokerage firm. When the old 401k is ready for transfer, you need to be able to tell your former company where to send the money!

In other words, the money needs a home. You make that home by setting up the account with a firm. In researching the best place for your IRA, consider the variety of funds available to you. You don’t need hundreds, but a solid compilation of say 30 funds to choose from would be best. Next, consider the fee structure. How much does the annual fee run? How about fees to move funds or change up percentages? Too high of fees could seriously erode the progress you make on the fund itself.

I hope this helps alleviate some of the stress around your retirement accounts. It really should be a simple, painless process. You want to have all your money working in tandem and then you let it run like the well-oiled money making machine it can be. All it needs from you is those monthly contributions.