Rolling a 401k Over to an IRA

A direct rollover from your 401k to an IRA is also referred to as a 401k rollover IRA. Rolling over your 401k or other retirement account to an IRA Rollover is usually the best decision for a number of reasons.

  1. No negative tax implications.
  2. You are no longer limited to the investment choices offered through your prior employer’s plan. Once your funds are in an IRA, you can invest in what’s in your best interest.
  3. You can obtain adequate diversification that may not be possible through your former employer’s plan. This is especially important if you have a high concentration of assets in your former employer’s company stock.
  4. You have total control of your account and can place the funds with whatever qualified custodian is the most convenient for you.

The 401k rollover to IRA process will usually entail the following steps:

  1. Request an application for benefit or distribution request form from your former employer or the record keeper for your former employer’s plan.
  2. Complete and sign the form and return it to your former employer.
  3. Your former employer will review and sign-off on the form and forward it on to the custodian of the 401k plan assets.
  4. The custodian will process the distribution request and deliver your vested account balance either directly to the custodian of your IRA rollover or directly to you in the form of a check that is made payable to your IRA rollover custodian.

The exact process you will go through to fund your 401k rollover IRA will vary based on the plan and where the assets are held, so be sure to check with your former employer’s human resources department for specific instructions on how to process your 401k rollover.

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