How to roll over your 401(k) with Principal

If you have a 401(k) at Principal from a previous job, there are a few options for you to consider when doing a rollover. The process for Principal can be done either online, by phone, or by mailing or faxing their rollover request form. Once the rollover is initiated, Principal will usually send a check directly to your new account provider and you should see your funds deposited in 10-15 business days after you’ve submitted the request.

We’ve laid out a step-by-step guide to help you roll over your old Principal 401(k) in five key steps:

1. Gather your Principal 401(k) details
2. Choose a new account
3. Initiate your 401(k) rollover with Principal
   
4. Confirm that the Principal 401(k) funds are deposited to your new account
5. Make sure your IRA is being invested appropriately

STEP 1

Gather your Principal 401(k) details

First, get together any information you have on your Principal 401(k). It’s okay if you don’t have a ton, but any details like an old account statement or an offboarding e-mail from your former HR team can help. 401(k) paperwork can be confusing, so just focus on identifying the following items:

1. Check your account for rollover eligibility. You typically have to wait about 2 weeks after leaving your job before starting a rollover. Check with your old HR department to verify whether your Principal 401(k) is eligible.
2. See what type of 401(k) you have. The type of 401(k) you have determines what type of IRA you can open (more on this in step 2). Most 401(k)s are traditional, meaning taxes are deferred on contributions. However, some businesses offer Roth 401(k)s which can be rolled into Roth IRAs. This allows you to make contributions post-tax and lets your account grow tax-free.
3. Double check your mailing address. Make sure your mailing address is correct on your Principal 401(k) account in case they choose to send a paper check through the mail.

STEP 2

Choose a new account

In order to move the money out of your 401(k) account, you’ll first need to have an account opened for that money to move into.

You have two main options:

1. An IRA — an IRA is an “individual retirement account”. As the name suggests, it’s an account you open up on your own and it isn’t connected to an employer.
2. A new 401(k) — you might have an active 401(k) account with a current employer. If so, you may be able to transfer your old 401(k) savings into that current account. This isn’t always possible though, and you’ll need to check with your current 401(k) provider and HR person.

We’ve written a full guide on the five key differences between 401(k)s and IRAs if you’re trying to understand all of the differences.

Ultimately, most people who roll over an old 401(k) do so into an IRA for a few key reasons:

• Not tied to an employer — IRAs are generally easier to keep track of since they’re opened by you at an institution of your choice like Fidelity, Vanguard, or Betterment.
• Wider range of investment options — your 401(k) account generally has a limited set of investment options. With an IRA, you can invest your money in a wide range of stocks, ETFs and even private assets like angel investments and cryptocurrency.
• Quicker process — according to the GAO, rollovers into 401(k)s tend to be more time-consuming and administratively challenging than rollovers into IRAs.

Think of your IRA as helping you do two key tasks:

1. Receive the money you’ve saved in your 401(k) at previous jobs so you can consolidate your savings and keep track of them.
2. Grow that money by allocating it into investments that will increase over time.

The good news? Opening an IRA can almost always be done online and should take you less than 10 minutes, if you don’t already have one.

STEP 3

Initiate your 401(k) rollover with Principal

You’re making great progress. You’ve confirmed key details about your 401(k) plan and you have an IRA to transfer your money into. The next step is to initiate your rollover with Principal. Principal has a few methods for requesting a rollover to another institution:

1. online through your Principal Financial account
2. by filling out Principal’s rollover authorization form
3. by calling Principal

Authorize online

The simplest way to submit a rollover request with Principal is by logging in to your online Principal account.

One you’re logged in, look for an option like “move assets”, “roll over money”, or “start a distribution”. These options can sometimes be hidden under an “actions” or “withdrawal” menu.

Ultimately, the option you want to select should explicitly say “rollover” and you’ll often need to specify that you want to move your funds “out of the plan” or “to another institution”.

Two other important tips to keep in mind while going through the online process:

1. Opt for a direct rollover into an IRA at another institution — this is easier than an indirect rollover.
2. You may be asked how much of your balance you want to roll over. It’s easier to do a full rollover so you don’t leave any money behind.

Authorize via Form

Rolling over via form allows you to avoid a human conversation but can sometimes get rejected which will prolong the process. If you’ve confirmed that your mailing address and contact information on your account is correct and that your plan is eligible for a rollover, initiating your rollover via form is worth considering. If you aren’t sure, you may want to initiate your rollover over the phone or online to avoid any issues during processing.

You can download the Principal direct rollover form by logging into your online account. Once you’re logged in, follow these steps:

1. Go to the “Rollovers” menu, and choose “Rollover IRA”,
2. Choose “Roll money outside Principal”
3. Hit the “Request rollover” button, which should download a PDF

Once you have the form, you’ll need to fill out, sign, and send it back to Principal by mail or fax. The mailing address and fax number can be found on the rollover form.

Authorize via Phone

If you prefer to speak to a Principal representative to make sure everything is good to go, you can also initiate your rollover over the phone. Contacting Principal directly over the phone allows you to correct any issues on your account, update your mailing address, and initiate the rollover all in one go. Principal‘s phone number should be visible on an old account statement, website, or on the distribution form.

In order for your call to go smoothly, follow these tips:

1. Set aside 30 minutes and a quiet space in which to make the call. Most of the time the call itself will take around 10 minutes, but there can often be a waiting time before you’re connected to an operator.
2. If you have an old 401(k) statement, keep it handy. No worries if not — you’ll be asked for your social security number and some other personal details to verify your identity.
3. Before you do the call, log into your new IRA account. Note down the following information:
   • Your IRA account number
   • Any other check-related instructions. These details are usually found on the IRA provider’s website in a “Funding” or “Rollover instructions” section and include things like the name of the institution to whom the check is made out (usually the full legal name of the IRA provider you’ve chosen).

Then place the call. Be prepared for a little hold time but in our experience the entire call should take no longer than 30 minutes.

Don’t forget to confirm your mailing address during the call. Principal will mail your rollover check to the address they have on file. If you need to update your address with them, just let the Principal rep know during the call and provide your current address.

STEP 4

Confirm that the Principal 401(k) funds are deposited to your new account

Principal will typically send your 401(k) funds directly to your IRA or new 401(k). If thats the case, simply keep an eye out for your rollover funds to hit your new account in 10-15 business days.

In some cases, they may send the check to you to deposit or forward onto your new provider. There are a few ways you can deposit your check depending on the provider:

• Mobile deposit — the easiest option is to check your providers mobile app to see if they have a mobile deposit option. Not all providers provide this option but it’s worth checking. Mobile deposits are the quickest option and typically take 3-5 business days to show up in your account.
• Deposit in person at a local branch — if your provider has a physical branch near by, you can also deposit the check in person. Checks deposited in person typically take 3-5 business days to show up in your account.
• Send the check by mail — you can also send the check by mail to the provider using the address you previously looked up. Funds that are mailed can take up to 15 business days to show up in your account.

STEP 5

Make sure your IRA is being invested appropriately

Remember there are two goals of rolling over an old 401(k) into an IRA — the first is to consolidate your 401(k) assets, and the second is to grow those assets by allocating them into investments that will increase in value over time.

Your very last step in executing a rollover is to make sure that second goal is being met and that the funds in your IRA are being appropriately invested. If you chose an automated IRA then this should happen automatically. That’s because as soon as your funds arrive they’ll be allocated into a portfolio that was created for you during the sign-up process for your new IRA account. You should still log in and check to make sure that’s the case, but usually there’s nothing more for you to do.

If you choose a self-directed account then you’ll have to invest the money yourself. Often the simplest option is to purchase a target-date retirement fund — this is an investment vehicle that puts your money into a combination of higher-risk, higher-return stocks and lower-risk, lower-return bonds. The exact mix changes as you age so that you have more stocks when you’re younger and less as you get older.

Because stocks can generate higher long-run returns, but are also more volatile, you might consider owning a higher percentage in stocks in your early working career and gradually shift away from stocks as you near retirement.

Otherwise, you can assemble a portfolio on your own by making individual security trades.

Get started on your Principal 401(k) rollover

401(k) rollovers are a great way for you to tax-efficiently transfer the savings in old 401(k) accounts you have. If you roll over into an IRA, you may also be able to invest in a wider range of assets.

The process can seem a little daunting, but there’s just five key steps to follow. Most people who complete a rollover are glad they did. The assets in accounts like your IRA will probably end up being your biggest source of financial support when you retire. Investing a little time to get those assets set-up and working for you in the right way can really pay off.

Start your Principal 401(k) rollover with Capitalize

At Capitalize, we’ve made it our mission to make this process easier for everyone. If you choose to do a 401(k)-to-IRA rollover, we can handle the entire process for you. Most of the process can be done online and our rollover experts will guide you through any of the manual parts.

Best of all, our rollover service is 100% free to you.

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