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  • Writer's pictureRPA Editorial Team

Rollovers Are Easier Than You Think

Updated: May 9, 2019

As we begin a new year, many of us will consider financial goals to better position ourselves for retirement. Often times, that includes examining bank statements for purchases (“where can I cut back?”), reviewing monthly expenses like cell phone and cable TV, determining which financial institution offers the better return on checking and savings accounts, and increasing 401(k) contributions to increase long-term savings, …just to name a few.

You’ll be busy researching your spend and save patterns, which is great. However, in addition to that, you’ll also need to understand the types of investments made and where your money is sitting. Often times, accounts are opened in years past and forgotten.

For example, have you switched jobs recently? In the midst of a job change, you may have forgotten about a retirement savings account that you established and contributed to, but forgot to decide whether you should leave it with your old employer, or take it with you. This could even be a retirement account for jobs previous to your most recent change. All of these retirement accounts are much easier to manage if they are consolidated.

If you have these old accounts out there, you may want to consider a direct “rollover.” A rollover is the term for transferring your tax protected retirement savings from one retirement account to another retirement account. These accounts could be IRA’s, 401(k)’s, 403(b)’s, profit sharing or other types of retirement accounts. There are rules governing rollovers from one type of retirement account to another, and we’ve included a chart below to show you the various combinations possible.

Rollovers are easier than you think…if you do it right. If you’re rolling funds from one corporate sponsored account to another, RPA can help you to understand the process.

So, where do you start?

1. First, you’ll open a new employer sponsored account with your current employer. Then, you’ll contact your former employer and ask for their withdrawal/rollover form. Beware…the forms can be confusing. US shares that it’s imperative to read the directions carefully and be sure to “have the funds directly transferred from your old account to your new account without ever touching the money yourself. The administrators for the accounts are called ‘custodians,’ so look on the forms for guidance for directing the funds from the current custodian to the new one.”

Remember, you don’t want your name on that disbursement check. Otherwise, the IRS will ask for their 20% and require your company to withhold the taxes. You can get it back…but you’ll have to file a separate income tax return for that year and then deposit that 20% back in to your retirement account within 60 days or you’ll have to pay penalties and taxes on it.

2. Complete the form electing a rollover and fill in your current plan’s information. If you get stuck, RPA can help you!

3. Return the form to your former employer. The best way is via fax so you have proof it was sent.

4. Once you’ve initiated the rollover, you should see it show up in your new account in about 3 to 6 weeks. In the meantime, remember those financial goals you want to set in 2019? This is a great time to review your contribution. Are you contributing the maximum? Or just enough? US shares “without auto-enrollment, people tend to contribute only enough to get the maximum employer match, simply because it seems like a good benchmark. A smarter approach is to set two savings goals: a basic goal, which makes the most of the employer match, and a ‘stretch’ goal. That way, you are saving to achieve the goal you have set, not just reverting to the default guidelines offered by your employer.”

As you’re looking to the future and embarking on a new year, find out where your money is and move it to where it makes the most sense. Consolidating these accounts make them much easier to track and manage. If that involves a rollover to a new employer sponsored account, start that process now. Remember, RPA can help you complete those forms and remove the chance for error…helping you to start 2019 off in the best way possible- saving for retirement.



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