Completing a 401(k) rollover involves opening an IRA, contacting the company running the 401(k) and then submitting a request to move the funds from the current 401(k) to the new IRA, explains Marketwatch. The new IRA can operate through an employer or any financial institution that a person chooses.Continue Reading
Individuals also have the option of completing an indirect rollover, which occurs when the administrator of the closing 401(k) sends a check to the contributor for the full amount of the balance. The contributor must deposit the money into a new IRA within 60 days, as Bankrate explains.
If the money is not in a new retirement account within the allotted time period, the check is considered a withdrawal. If this is the case, the contributor must pay taxes on the funds along with a 10 percent early withdrawal penalty, according to Marketwatch.
Each 401(k) plan administrator has different requirements for rolling over a 401(k), but most of them ask for contact information, the name of the receiving institution and an account and routing number for the new IRA, according to Marketwatch. It's not always necessary to complete a rollover because some employers allow employees to keep their retirement accounts after leaving the company. Staying with a former employer is ideal if the old company has favorable investment options and limited fees.Learn more about Financial Planning