Dominique Broadway walks through rolling over an old 401(k) after leaving a job. Get your most recent statement, contact your former plan provider, and open a rollover IRA at a brokerage like Fidelity or Vanguard. Do a direct rollover to avoid taxes and penalties, and you'll have full control of your retirement money.
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Hey, it's Dominique Broadway, award-winning personal finance expert and the founder of Finances Demystified. And today I'm going to be taking some questions from my team. I want to see how I can help them with their finances. So does anyone have a question or like a burning financial thing that they're trying to get under control? Yeah, I actually just left my job and I have an old 401(k). What am I supposed to do with it? Good question. So first of all, congratulations for making that transition, right? Leaving your old job, finding a a new one, which hopefully is much better than the last. But a lot of times when we leave old jobs, we're so excited to get out of there and start that new thing that we will leave our 401k and totally forget about it, right? I've met people who literally have left their, left their 401k at their old job for years and years and years. So if you have a 401k at an old company, the first thing that you want to do is actually pull your most recent 401k or retirement statement. Statement. So you want to pull this statement and just start looking at it and seeing like, one, how much money do I have in this account? What type of account is it? Is it a 403(b)? Is it a SEP IRA? Is it a regular traditional 401(k)? Is it a Roth 401(k)? So that's the first thing you want to do. And you also want to see what type of investments you have in the account, right? So you want to get a clear understanding if you have mutual funds in this account, stock in the account, maybe company stock from whatever company you worked at, or if all your money has been sitting in cash or in a money market account. So you want to have a clear understanding of how much you have and what is in the account. The second thing you want to do is contact the 401k provider. So you should be able to find the contact information of your old 401k provider or your old retirement plan provider on the statement. That's usually at the top or the bottom somewhere. So give them a call and let them know that you have transitioned out of the old job, you're starting a new one, and what are your options to move that money from the old account to a new account. Now really quickly, you may be asking, why do I even want to move this money? You wanna move this money for one main reason, so that you can have control over your retirement account and over these funds. Because if you leave that money at the old company or the old provider, technically your old job is kind of still in control over that account, all right? So now that you've contacted the provider and they have told you exactly what you need to do to move that money over, Now you want to start taking those steps. Now those steps will typically vary based on the company, but usually they're going to have you fill out a form either like old school on paper or fill it out, you know, online to tell them what you want to do with the money or where you want the money to go. All right. So now that you filled out this form, you need to have somewhere to send this money to. Now what you don't want to do is send that money to your checking account. That's not what we doing. Okay. That's how you are immediately subjected to tons of taxes and facing early withdrawal penalties if you're under 59 and a half, which is the retirement age. So now the next step is for you to contact a new investment account or broker and open a new account there. So now that you've contacted the new investment firm, you're going to open up a new account. So this new account that you're going to open will vary based on what type of account you had at the old firm. So For example, if you had a traditional 401k at the old firm, you can open up a rollover IRA and roll over that money to the new account. Hence the name rollover IRA, meaning you're going to be rolling those funds over from the old account to the new account. If you had a Roth 401k at the old company, then you need to open a Roth IRA at the new provider, etc., etc. Once you get that account open, and you can open that, open up that new account at any, any place that you prefer. This could be Webull, Fidelity, Vanguard, E-Trade, whoever. It doesn't matter, whatever company you prefer. Now that you have this new account open and you have your account number, you're going to be able to now provide that account number to your old retirement plan provider, and they're going to start the process to move those funds over to your new account. Now, another thing I wanna add, as you're filling out this form and telling your old provider what to do, they're gonna ask you an important question. They're going to ask you if you want these funds transferred over in kind or if you want them liquidated and transferred over in cash. So what does it mean to transfer in kind? When you transfer funds from an old account to a new account in kind, That means that you want the positions moved over exactly the way that they are. So example, if in your old retirement account you had company stock, you have mutual funds, maybe you have bonds, that means that I want you to take my account exactly the way it is, the bonds, the mutual funds, whatever, and move those things in kind the way that they are to the new account. Or you can say, "Hey, I want you to liquidate." Meaning, I want you to sell everything, turn it into cash, right? Make it available in cash and then move that cash over to the new account. Now, another thing you want to make sure that you're aware of, if you're telling them to sell everything, that means that you are locking in any gains or losses that you have in the account because you're liquidating it, okay? So, if you don't want to lock in any gains or losses, then you want to have them transfer it in kind. All right, so that is the next step. Now the last and final step is your money hopefully has made it over to the new account. Yay, right? All right, so now what do you do? If you've transferred everything over in kind, then you really don't have to do much, right? Because your investments came over the way that they were previously. If your investments came over in cash, then you still have to start making some financial decisions about what you want to invest that money in. Now the cool thing, like I said earlier, now that this money is over into this rollover IRA or Roth or whatever other account that you moved it to, now you have full and complete control over your account. And this is not considered a taxable event because you rolled the money over, meaning you moved it straight from your old account to your new account. So now it's in the new account, you can make your investment decisions, and you are good to go. So those are my exact steps that you need to take so that you can regain control over your old retirement account. For more videos like this and other amazing financial education, make sure you Follow me, and you can use the links below to go to our website, financesdemystified.com, or join our upcoming free investing masterclass. Thanks for tuning in, and I'll see you soon.
