If you’re changing jobs or you are unsatisfied with the retirement plan options offered by your current employer, you may need to move your retirement savings out of your 401(k). This is known as a 401(k) rollover.
A 401(k) rollover refers to the process of transferring funds from a 401(k) account to another tax-advantaged retirement account. This is commonly done when you change jobs and prefer not to keep your account with the previous employer. Unlike an early withdrawal, which involves taking money out of a 401(k) and potentially incurring taxes, a rollover typically does not have a tax impact since the funds remain within a qualified retirement account.
How do you initiate a rollover?
To get started, please navigate to the Transfer page within your BlueReef / Betterment account and select the “Rollover” option. Follow the prompts to answer a series of questions. This will provide you with detailed instructions tailored to your provider’s specific requirements for completing your IRA transfer. Betterment will provide the necessary transfer paperwork for you to sign, which you will then need to send to your provider as instructed.
The rollover process usually involves:
- Select and open a suitable BlueReef / Betterment IRA account for your rollover.
If you are transferring pre-tax assets, consider a traditional IRA. For rolling over Roth (after-tax) assets, select a Roth IRA. If you have a combination of both types of assets to rollover, you will require two separate IRAs. - Locate your current 401(k) account.
Get in touch with the financial institution managing your previous employer’s plan. Inform them of your intent to initiate a direct rollover from your employer plan to your BlueReef IRA and inquire about the specific information required for the rollover. - Funding of your BlueReef account.
Rollovers typically take 2-4 weeks to complete. Usually, the money is transferred from the old account to the new one. However, if the funds aren’t transferred directly into the new account and you receive a check from the old 401(k) institution, this check will need to be manually deposited in the new IRA account. In this event we will provide deposit instructions.
** Note that if you receive a check directly from the old 401(k), it is important to deposit the funds into your IRA within 60 days to avoid income taxes and potential early withdrawal penalties.
The sooner you initiate your rollover and start investing through your new IRA account, the sooner you will regain control over your investments.