Rollover 101

What are rollovers?

“Rolling over” means transferring your old retirement account into a new one. This typically occurs if you leave your employer and start a new job - you transfer the money in your old 401(k) into your 401(k) at the new employer.  

What happens to my retirement savings when I leave my job?

If you leave your employer, you may have the following choices regarding what to do with your old 401(k) retirement savings:

 Cash or a "lump sum" distribution

You should try to avoid this option. While you would have immediate access to your money, you pay a large amount of money in income taxes and possibly to early withdrawal penalties imposed by the IRS. You will also lose the ability to benefit from the special tax advantages that a retirement account offers. 

Stay in the existing 401(k), if allowed by your previous employer

You maintain your money’s tax-advantaged status, but you may be subject to different rules, like required minimum amounts, as a former employee. Also, you may not be able to contribute additional funds to the old plan. It also tends to make your household finances more scattered and your retirement plans more complicated since you have multiple accounts in different places.

401(k) rollover to new company’s 401(k), if allowed by new employer

You may transfer your 401(k) savings into a 401(k) plan at your new job without the money losing its tax protection or growth potential. 

Consolidating your retirement savings into one larger pot - the original 401(k) assets + future contributions under new employer - is usually advantageous. A larger pot of money enables more money to grow bigger. Also, you may be eligible for a wider variety of investments and lower account and transaction fees with a larger plan balance. Overall, you should have greater opportunities with your 401(k).

401(k) rollover into Traditional/Roth IRA

You may transfer your old  401(k) assets into an IRA. This rollover also protects the tax status of your savings . Note that the rules about how you can contribute to, invest, and access your retirement savings are different for an IRA than for a 401(k) plan. Please see our Taxes 101 page for additional information on IRAs.

How do I rollover?

In general, the process requires a check or a wire transfer from your old account. You will also need to fill out some forms for the process. If you'd like to roll your old account into your Dream Forward 401(k), give us a call at 1-800-695-5131. 

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