Top 10 Checklist for your 401K


Check Account Value

Whatever you do, make every attempt to avoid pulling the money out of the confines of a 401(k) or IRA; otherwise, you’ll pay taxes and a 10% penalty if you’re under age 55.


Pay Back Any 401(k) Loans

If you borrowed any money from your 401(k) during your last employment make sure you’ve repaid any loans. They are due upon your exit and any money you owe becomes reclassified as taxable income.


Select Where To Open An IRA

An IRA is a type of account, not a type of investment. Your investment plan and goals will help you choose the right company to work with.


Contact Your Provider

Ask for a distribution request form. Make sure you provide all required signatures (some IRA rollovers get rejected because a spouse forgot to sign the paperwork). Your employer may require signatures to be notarized.


Consider Age

If you’re in the year when you’ll reach age 55 or older, maintaining the 401(k) plan gives you an option to begin taking distributions prior to age 591⁄2 (as early as age 55) without penalty. If you move these funds over to an IRA, this option is lost.


Tax Implications

You must be aware of the tax status of funds in your employer’s plan. Do the balances contain after tax contributions or are they pre-tax? This determines if your rollover will be to a ROTH or Traditional IRA or a little bit of both.


Understand Fees & Expenses

Plan fees can include administrative costs fees for services, such as access to a customer service representative. IRA account fees can include administrative, account set-up and custodial fees, among others. Before making a rollover decision, know how much you are currently paying for your plan. Compare that to the fees and expenses of a new plan or IRA.


Request A Check

This is one of the most important aspects of your rollover. When you request a check from your employer’s plan you want to have them make it out to the custodian of the IRA account that you are rolling your 401k over to. For example, if you were having your 401k rolled over into a Charles Schwab IRA you would request that the check be made out to Charles Schwab, For The Benefit of “Insert Your Name Here”.


Switch Traditional Assets to Roth

If you’ve made Roth 401(k) contributions and decide to roll over that money to an IRA or your current employer’s 401(k), your new account will be Roth, too, meaning that you won’t owe tax on qualified withdrawals.


Invest Your Funds

This is the point where your decision to rollover should pay off. It’s probably a wise plan to figure out what risk you’re comfortable with taking and marry that to the returns you’re looking for to meet your retirement goals.