How do you rollover a 401K?

Answer 1

Understand your options. When you leave a job, you typically have four options: leave the money in your old employer's plan, roll it into your new employer's plan, put it into an IRA, or withdraw the balance.

• When to stay put: If your current plan has great investment options at low prices, it won't charge you fees to stay in the plan (ask HR to find out), and you don't mind getting one more brokerage statement, it's fine to leave it where it is.

• When to roll in : If you have access to your new retirement plan right away, and the options are good and cheap, it's fine to roll your old balance into your new account.

• When to rollover: More often than not, neither of the above are really great options. If that's the case, you can move your funds into a rollover IRA - a kind of brokerage account that tends to offer far more options.

• Don't cash out: Unless you really need the money, don't withdraw it. You'll pay income tax on the money, plus a 10% penalty for early withdrawal if you're under age 59 1/2. For Roth 401(k)'s, only the earnings (non-contribution portion) are subject to the penalty and income tax, though in some cases--qualified early withdrawals--are not subject to the penalty.