401k Rollover: The Complete Guide (2024)

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

401k To IRA Rollover Calculator

An annuity is a retirement insurance policy that provides an income for the rest of your life, even after the account runs out of money. Automating this process with an IRA annuity can give you peace of mind in knowing one less thing to worry about in retirement.

Note: You can purchase an annuity (with no tax penalties) by rolling over your traditional and Roth 401k, IRAs, retirement accounts, investments, and cash.

What Is A 401k Rollover?

A 401k rollover is a process by which you can move your retirement savings from one 401k account to another. This can be a great way to consolidate your retirement savings or to move your money into a better investment plan.

Two main types of 401k rollover options are direct and indirect.

Direct Rollover

A direct rollover is when you instruct your old 401k plan administrator to send your money directly to your new 401k plan or annuity. This process is simple, and straightforward, and no taxes or penalties are involved.

Indirect Rollover

An indirect rollover is when you withdraw the money from your old 401k account and deposit it into your new 401k within 60 days. With an indirect rollover, you will be taxed on the withdrawal, but as long as you deposit the money into your new 401k within the 60-day window, there are no penalties.

Types of rollovers

When considering a retirement account rollover, it’s essential to understand the different types of rollovers available. The eligibility of rollovers and the specific rules vary depending on the type of retirement account.

  • Eligible Rollover Distributions: Most distributions from individual retirement accounts (IRAs) are eligible for rollover. However, required minimum distributions (RMDs) and excess contributions are not rollover eligible.
  • Traditional IRA Rollovers: Traditional IRA accounts allow for rollovers of eligible distributions from other retirement plans or IRAs. This provides flexibility in managing retirement savings and taking advantage of tax-deferred growth.
  • Plan-to-IRA Rollovers: Individuals can roll over distributions from employer-sponsored retirement plans, such as 401ks or 403bs, into an IRA. This allows for a wider range of investment options and potential tax advantages.
  • Plan-to-Plan Rollovers: Individuals can also roll over distributions from one employer-sponsored retirement plan to another. This can be beneficial when transitioning from one job to another and helps consolidate retirement savings.

Understanding the specific rules and limitations for each type of retirement account is crucial when considering a rollover. Certain types of distributions, such as loans, hardship distributions, and withdrawals from automatic contribution arrangements, may be ineligible for rollover. It’s important to consult with a financial advisor or tax professional to ensure compliance with IRS guidelines and make informed decisions regarding your retirement savings.

How Does A 401k Rollover Work?

You will need to take a few steps to complete a 401k rollover.

First, you must contact your old 401k plan administrator and tell them you want to do a rollover. They will likely have some paperwork for you to fill out.

Next, you will need to open a new 401k account with the investment company of your choice.

Once your new account is set up, you will instruct your old 401k plan administrator to send your money directly to your new account. This is called a direct rollover.

If you do an indirect rollover, you will withdraw the money from your old 401k and deposit it into your new 401k or annuity within 60 days. Again, you must contact your old 401k plan administrator and tell them you want to do a rollover. They will provide you with the necessary paperwork.

Once you have withdrawn the money from your old 401k, you must deposit it into your new 401k within 60 days. You can do this by writing a check or transferring money electronically.

It’s important to note that if you do an indirect rollover, you will be taxed on the withdrawal. However, as long as you deposit the money into your new 401k within the 60-day window, there are no penalties.

Can You Rollover A Pension Into A 401K

Benefits of a 401k rollover

You can move your 401k to an IRA before you retire. There are many reasons, like when you get close to or enter retirement.

Consolidate Your Money To Know How Much You Have

When you put your retirement money in a single account, you can see how much money is there and how long it will last. This way, you can know what lifestyle your money will support when you retire.

Withdrawal From One Account

When you retire, it is easier to withdraw your money if it is all in an IRA. However, if you have many 401k accounts, you must be careful and ensure that the money spread across multiple accounts lasts for your whole retirement.

More Investment Options

In an IRA, you will have more investment options than if you had your 401k. You can customize your portfolio to match what stage of life you are in. You can change it as time goes on.

Transparency and control over fees

You can choose an individual retirement account (IRA) or annuity provider with transparent fees to know how much you will pay.

While you can benefit from changing your old 401k to a new one, sometimes it is better to keep your old one. First, you must ensure you are not paying high 401k fees or losing money.

If you have less than $5,000 in your 401k, your company can take it without warning and put it into a safe harbor IRA. This is bad because the fees are higher, and there aren’t as many investment options. This is another reason to consider rolling your 401k into a better account.

401k Rollover vs. Early Distribution

401k RolloverEarly Distribution
Tax AdvantagesTax-deferred growthSubject to ordinary income taxes
Investment OptionsWide range of choicesLimited to employer-provided options
Adherence to IRS GuidelinesOpportunity to consolidate retirement accountsNo consolidation benefits
Early Withdrawal PenaltiesPotential avoidance of additional taxes and penaltiesSubject to a 10% penalty plus ordinary income taxes
Pension Rollover To 401K

Tips For Choosing The Right Investment Plan

Choosing the right investment plan for your 401k rollover at retirement is essential! Here are a few tips to help you choose the best plan for you:

  • Consider your investment goals. What are you hoping to achieve with your retirement savings?
  • Think about your risk tolerance. How much risk are you willing to take on?
  • Research different investment options. Many different types of investments are available, so it’s essential to research and choose the correct option.
  • Consider fees and expenses. Some investment plans have higher fees than others. It’s essential to consider these when choosing a plan so that you don’t end up paying more in fees than you need to.

How To Find An Old 401k

Contact Your Former Employer.

The most straightforward way to check up on a previous 401k plan is to contact the human resources department or a third-party administrator (TPA) at your company.

U.S. Department of Labor’s Employee Benefits Security Administration

The U.S. Department of Labor has a database for people looking for retirement plans that have been abandoned. This database will help you determine if the plan has been terminated and who to contact.

National Registry of Unclaimed Retirement Benefits

Your former employer might have left money for you in a retirement account. You can check to see if they did by going to unclaimedretirementbenefits.com.

Pension Benefit Guaranty Corporation

The Pension Benefit Guaranty Corporation’s Missing Participants Program has recently been expanded to include 401k plans.

How Much of a 401(K) is Taxed After Retirement?

Because a 401k is a tax-deferred qualified retirement plan, all income withdrawn from a 401k is subject to ordinary income taxes.

Can You Transfer A Pension To A 401k?

It is possible to roll a pension into a 401k account. This process is called a pension rollover.

A pension rollover allows you to transfer the money from your pension account into a 401k account or another qualified retirement account, such as an Individual Retirement Account (IRA). This can be a good option if you want more control over your retirement savings or to consolidate your retirement accounts.

Can You Roll a 401k to an Annuity?

Yes. You can roll over a 40(k) to an IRA annuity. If you’re seeking to roll over your 401k into an annuity, remember that the key is finding an annuity provider who offers this option and is happy to accept such a transfer.

Often debated among “financial experts” is whether an annuity should ever be used in a tax-qualified 401k. Like a 401k, annuities provide income tax deferral. Therefore, placing an annuity inside a qualified retirement plan may initially seem redundant.

That might be true if an annuity’s only benefit is tax deferral. But, the fact is, annuities offer many advantages, whether held inside or outside a 401k.

Annuities are flexible investment products that can help you achieve your long-term financial goals and provide a source of retirement income. Tax deferral alone is not a sufficient reason to use an annuity in a tax-qualified plan. But income options, death benefit protection, investment selections and services, and flexibility are benefits an annuity can bring to any 401k.

Tax-Deferral

There are no tax consequences as long as you follow IRS guidelines. You won’t pay any taxes on gains from the annuity until you withdraw your money.

Growth Potential

You can earn additional interest based on the upward movement of an external market index in both bull and bear markets.

Protection from market downturns

You will not lose money due to market downturns in a fixed or fixed index annuity. If the markets have a down year, you earn zero interest. In exchange for this protection, unlike an individual stock through a mutual fund, you are limited on the upside you can get each year.

A variable annuity will provide unlimited upside potential without protection from volatile market conditions. However, adding a Guaranteed Lifetime Withdrawal Benefit can protect the annuitant from running out of money due to a stock market crash.

Guaranteed retirement income for life

You can choose to annuitize your annuity to receive annuity payments over a period of time or for life or add an optional income rider to generate a paycheck you can never outlive. Sometimes, the insurance company will provide a paycheck that increases to help with inflation and the cost of living.

Flexibility

In addition to an income for life, waivers of surrender charges are often included to offer accessibility to your retirement plan in case of emergencies like entering a nursing home or terminal illness. In addition, there are no limits on annual contributions to an annuity.

Estate Planning

With most fixed-indexed annuities, your beneficiaries are guaranteed to receive your annuity’s Accumulation Value or Minimum Guaranteed Value, whichever is greater.

Contribution Match

Like a 401k match from your employer, some annuities can offer a premium bonus (up to 20%) on rollovers and additional deposits.

401k Vs. Annuity: A Comparison

Annuity401k
No Contribution Limits (non-rollover) Limited Contributions
Insurance or Investment Products Investment Products
Guarantee on Investment No Guarantee on Investment
Tax-Deferred or Tax-Free Growth Tax-Deferred Growth
Pass Down to Beneficiaries Pass Down to Beneficiaries
Spousal Continuance Spousal Continuance
Market Volatility ProtectionCould Lose Money
Guaranteed lifetime IncomeCould Run Out of Money
Can You Roll A Pension Into A 401K

How Long Does It Take To Rollover A 401k?

There is no one-size-fits-all answer when rolling over a 401k. The time it takes to complete the rollover process will depend on several factors, including the type of 401k you have, the financial institution where your 401k is held, and the financial institution where you want to roll over your 401k.

If you have a traditional 401k, you will likely be able to complete the rollover process within a few weeks. However, if you have a Roth 401k, the rollover process may take longer, as special rules apply to Roth 401k.

Finally, it’s important to note that you may be subject to taxes and penalties if you do not complete the rollover process within 60 days. Therefore, working with a financial advisor (like The Annuity Expert) or tax professional must ensure you complete the rollover process correctly and promptly.

Retirement Account Withdrawal Comparison

Most financial advisors recommend withdrawing up to 4% of your tax-advantaged retirement account and adjusting for inflation. The table below compares withdrawing from various retirement savings accounts yourself or a financial advisor with an annuity that automates your retirement income distribution.

FeaturesAnnuity401kIRARoth IRA
Withdrawal Percentage5.20% – 6.55%4%4%4%
Can Income Increase?YesYesYesYes
Can Income Decrease?NoYesYesYes
How Long Will Money Last?Lifetime30 Years+30 Years+30 Years+
Annual Fees0 – 1.50%1% – 4%1% – 4%1% – 4%
TaxationTaxable/Tax-FreeTaxableTaxableTax-Free
Death BenefitAccount BalanceAccount BalanceAccount BalanceAccount Balance

Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:

  • Annuity: Between $52,000 and $61,000
  • 401k: $40,000
  • IRA: $40,000
  • Roth IRA: $40,000

Next Steps

401k rollovers can be a great way to consolidate your retirement savings or to move your money into a better investment plan. By following the steps outlined above, you can efficiently complete a rollover! And by choosing the right investment plan for you, you can ensure that your retirement savings are working hard for you. Request a quote below.

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Frequently Asked Questions

What is the 401k rollover time limit?

The 401(k) rollover time limit is 60 days. If you take a distribution from your 401(k), you must complete the rollover to another eligible retirement account within 60 days to avoid taxation and potential penalties. Failing to meet this deadline can result in tax consequences.

What are the 401k rollover rules?

401(k) rollover rules allow for distributions to be transferred to another 401(k) or an IRA without incurring penalties, provided the rollover is completed within 60 days. Direct rollovers, where funds are transferred directly between institutions, are preferred to avoid mandatory withholding. Failure to adhere to these rules can result in taxation and penalties.

Can you move an old 401k into a new 401k?

Yes, you can move funds from an old 401(k) into a new 401(k) if your new employer’s plan accepts rollovers. Coordinating the transfer is essential to ensure it’s executed as a direct rollover, minimizing the risk of taxes or penalties. Before proceeding, always check the specifics and associated fees with both plan administrators.

Can you roll a pension into a 401k?

You can roll a pension into a 401(k) under certain conditions. This process involves transferring the value of your pension into a 401(k) plan, typically when changing jobs or if the pension plan allows for such transfers. This can be a direct rollover, where funds are transferred from the pension plan directly to the 401(k) without incurring taxes. However, it’s important to check the specific rules of the pension and 401(k) plans, as not all plans allow this type of transfer. Consulting with a financial advisor is recommended to navigate the rollover process effectively.

How many 401k rollovers can I do per year?

The IRS allows for multiple rollovers from 401k to 401k or IRA without any limitations, unlike the one-per-year rule for IRA rollovers.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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