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Rolling over your 401K or IRA for the First Time

Posted in Main Blog
March 04, 2015 by Amanda N. Share on: Share on Facebook Share on Twitter

jar of money for retirement

When I was in high school I had a “real world” type of project. The first part of the project involved learning about money management; this included everything from picking a career, the level of college, and the salary of an entry level position in that field. The second part of the project was participating in a financial literacy fair put on by the credit union league. The fair put students in real life situations about how to budget money. It was an eye opening experience to say the least.

This project really stuck with me. It instilled upon me the importance of managing my money but also about “paying myself first.” This means that you should always put money into your retirement first, and then work your budget with the remaining monies. As a result of this, at my first “real job” I signed up to participate in my companies 401k. I felt so grown up and responsible.

I recently switched jobs and had to figure out how to rollover my 401k, for the first time. Since I wasn’t sure how to navigate the process, I did a little research online and came up with 4 steps to follow when doing this.

  1. First I had to decide if I was going to put the money in my new employer’s 401k or into my own IRA. Since my new employer would be matching my contribution, I opted to roll my old 401k into their 401k program.
     
  2. I worked with my employer’s plan administrator to set up an account. This was very easy and we were able to do it right online. It was during this step that I was made aware of the “12-month rule.” The 12-month rule simply means that you are only allowed to make one rollover in a 12-month period. I wasn’t planning to move the funds anytime soon, so this wasn’t an issue, but I was glad the plan administrator told me about this rule.
     
  3. Once I had my new 401k set up I contacted my previous employers plan administrator and asked for necessary paperwork to do a rollover. I waited until after I had left my previous employer to request this information so it took a little longer to get it. My suggestion would be to get the contact information and forms before you leave.
     
  4. Finally, choose the investments you want your funds to go into. If you were happy with the location of your funds in your previous 401k you can keep them in the same funds, otherwise, this is a good opportunity to review other options and change things up. Even though I was sure I was going to keep my money in the same funds I still looked at other options just to reassure myself.

I was a little nervous, when I first realized I would need to move my retirement money. I had never done it before and didn’t want to mess it up. At the end of the day it wasn’t so bad and I’m happy with my new plan. I can even check my 401k online! All I had to do was download the free app.

Sources:
Vanguard
IRS
CNN Money



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