Understanding Prudential Financial 401(k) Rollovers
A 401(k) rollover takes place when you move your previous employer’s retirement plan to another account (and/or another financial institution) of your choice.
Many retirement savers choose to roll over their 401(k)s to take advantage of better investment options and lower fees, or to consolidate their retirement accounts.
With a 401(k) rollover, you’ll take greater control over your financial future. What’s more, a 401(k) rollover done right comes with no taxes or penalties. Finally, we find that people who take the active step to roll over their old retirement accounts have a better understanding of their investment picture overall, and have more of an opportunity to better manage their retirement savings.
There are two main types of rollovers: direct rollovers and indirect rollovers.
Direct rollovers happen when money moves from one financial institution directly to another. In this case, a direct rollover would happen between Prudential Financial and another financial institution — the one that you choose for your new account. If you’re going to roll over your former employer’s plan, we strongly recommend choosing a direct rollover since the potential for things to go wrong is significantly reduced relative to an indirect rollover.
Indirect rollovers are a bit more complicated. With an indirect rollover, you receive your former employer’s 401(k) funds personally, and then it’s your responsibility to re-deposit them to another retirement account before 60 days have elapsed. Failing to re-deposit your entire original 401(k) balance to a new retirement account within the timeframe can lead to costly taxes and penalties. Unless you need your retirement money to function as a type of short-term loan, we generally discourage indirect rollovers — if you can avoid them.
Let Capitalize handle your 401(k) rollover for you, for free! We’ve made it our mission to make the 401(k)-to-IRA rollover process easy for everyone. Learn more