Do you know when and how to do a 401(k) rollover? What type of rollover do you choose and where do the funds go? Find out on today’s podcast.
(Click the featured times below to jump forward in the episode)
In the middle of COVID, a lot of people are potentially looking at getting furloughed or laid off. What do you do with your 401(k) if you are let go or decide to change jobs? On today’s episode of Cover Your Assets KC, David will talk us through what happens with a 401(k) rollover and what kind of options you have along the way.
At the end of a job, you have three choices of what to do with your 401(k). Which one is best for you? Most often, people will choose to do a rollover instead of leaving it at the company or taking a distribution. David says taking a distribution after leaving a job should be considered a last resource.
There are two different ways to make a rollover: direct and indirect. David strongly recommends a direct rollover, which is from custodian to custodian. How does this work? If you work with an advisor, you and your advisor will call your current 401(k) company to let them know you want to do a direct rollover. They will send a check to your house but it won’t be made out to you, it will be written to the new custodian of the funds.
Once you’ve done a rollover, what happens to your investments? Do you keep the same ones or do they have to move? You will want to pick an asset allocation that makes sense for you based on your age, your risk tolerance, and how long until retirement happens. Know that you have a lot of options, but it’s important to choose what works best for you and your financial plan.
Listen to the full episode or click on the timestamps below to learn more.
[1:07] – What are your options for rolling over a 401(k)?
[2:53] – When you leave a company, what happens with your 401(k)?
[6:01] – What’s the difference between direct and indirect rollovers?
[10:57] – What happens with your investments?
[13:17] – What are the steps to do a rollover?