You've quit that job, go you! There is no better feeling.
But what happens to your retirement accounts?
- They don't go away. They are YOURs forever. You contributed, you invested (hopefully), you earned. That nest egg is the single most important thing that we want you to get organized after you leave your employer.
👀 6min read
What are my options?
Leave it (but there’s a catch)
- Technically, you could leave your retirement accounts with your ex-employer. The account will stay invested, but of course your company won't contribute or match any more dollars and you are unable to contribute into it. Some companies also start charging you a monthly fee to keep your 401k / 403b / retirement account with them. Do you want to pay your ex-employer???? NO. Do you want that account to just sit there? NO - we want it to live up to its potential.
- This is ALWAYS an [the best] option so you don’t get stuck with any of the above ^.
- If your new employer is offering you a 401k retirement account, amazing. But you’ll still need to transfer the old one and it can’t be transferred into your new 401k (‘cmon, that would be too easy).
- The key to transferring your retirement account out of your employer's hands is to put it in an IRA (individual retirement account; i.e not from your employer) that has the SAME tax benefits. We want to keep it the same to avoid paying any unnecessary taxes. The financial industry has coined this transfer a "ROLLOVER."
How do I do it?
Figure out what type of account you have from your ex-employer
- Remember, an employer given retirement almost always has a 4 in it: FOR YOU (more on this in this blog)
- It could be a Traditional 401k, Roth 401k, 403b...the list goes on. But you want to know what you have so you know what you want.
Open the SAME type of IRA account with a new bank or the bank your new employer is offering (remember, I = I opened).
What new bank?? We don’t care where and you certainly have options (here's some). But we do recommend checking that this new bank doesn’t charge an annual management fee. Free please. (note: it is possible to choose the same bank that your ex-employer chose, but you still want to roll it over from having your ex-employer owning it to you owning it).
- If your existing account is a traditional 401k/403b/457/SEP IRA, open a traditional IRA/rollover IRA
(THESE ARE THE SAME THING! Yes, this is very confusing. No, there is no reason for it. If you can pick either, go with Rollover).
- If your existing account is a Roth 401k, open a Roth IRA
Submit a "rollover" request with your ex-employer or bank where the money is held (THIS IS SO SO IMPORTANT SO YOU don't get taxed).
- It is EXTRA important that you don’t take a “DISTRIBUTION” and you submit a “ROLLOVER” or “TRANSFER”-- otherwise you pay a 10% penalty for withdrawing early (ouch) and pay taxes on the moneyyy (let’s not go there)
- Your ex-employer's bank will lead you through the steps. You’ll let them know what the new bank’s name is, what type of account you’ve chosen and it’s account number so your old bank can give your new bank all your money (yess).
- It is imperative that the money - “check payable” - is written out to your new bank/institution and NOT YOU.
- If you see otherwise, we might need to go back a few steps or submit for a change. We don’t want to withdraw and keep this money for ourselves, we want to roll it over to a new account and let it growww.
How does my money get put into my new account?
This is totally dependent on your old bank’s way of doing things.
- The money may be wired electronically
- They may send a check directly to your new bank
- They may send a check directly to you and ask that you mail it to your new bank to deposit it.
No matter how they send it, we want to make sure that the money is deposited into your new account within 60 days of the “date you receive” a retirement plan distribution. (exemptions are possible, but it’s just not a thing we want you to have to deal with)
Set yourself an alert! Rollovers usually take 7-14 business days to complete.
And then what?
No, this doesn’t happen automatically. Every time you move money into these accounts you will need to invest it. (unless you get super lucky and use the same bank as your ex-employer and you can transfer the exact investments -- RARE) YOU MUST BE INVESTED to reap the benefits of your retirement account!! Here's an intro to investing your account.