Enter your old employer to find your 401(k) and start your free rollover.
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By Jenn Pavlick
Updated on December 8, 2023
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If you’ve been saving in a Roth 401(k) retirement plan, you’ve been doing one of the best things you can do to set yourself up for a financially secure retirement. Money that’s in a Roth 401(k) has already been taxed (it’s “after-tax”) – this means that you won’t ever have to worry about any tax liability associated with the account, assuming you hold it for at least five years since your first contribution.
There may come a time, however, during which you choose to leave your employer. Fear not – you have options when it comes to your Roth 401(k) retirement savings and your personal finances. For any number of reasons, you might consider leaving it at your old employer, bringing it with you to your new employer, or even rolling it over to a Roth IRA at a provider of your choice.
Regardless of your plan of action, it’s a good idea to know how to roll over a Roth 401(k) if this possibility becomes a reality.
The process might seem complicated if it’s your first time, but it’s typically straightforward if you know what to expect after you’ve confirmed your eligibility for a distribution or rollover. In the case of Roth accounts, taxes are no longer part of the equation – which makes a rollover even easier. This process won’t work if you’re still with your employer, but if you’ve found a new role and are looking to move an old Roth 401(k), read on.
The word “provider” here is meant to refer to an online brokerage platform (like SoFi, Fidelity, or Betterment) or other financial institution. You’ll need to visit your chosen provider’s website and go through the account-opening process, which typically can be finished in less than 30 minutes. Make sure that the account you open isn’t a Traditional IRA (pre-tax) since your Roth 401(k) is comprised of after-tax dollars.
There’s also a possibility that you have an existing Roth IRA retirement account. If this is the case, you won’t need to open a new one; you can simply use it as the destination account for your Roth 401(k).
This is something that can be done in one of two ways. In certain cases, you can simply call your new Roth IRA provider and have them do most of the work – some will be able to contact your former employer’s 401(k) plan administrator for you, but there’s also a chance you’ll be responsible for coordinating. If you’d like assistance with this process, Capitalize is here to assist.
In the event that you do need to proactively reach out to your previous employer, read on for instructions.
You should be able to find contact information in the document packet you received when you left your job, or, alternatively, you can find the phone number to reach 401(k) support on your previous employer’s HR website.
You’ll want to call them and request a direct transfer of your Roth 401(k) retirement funds to the Roth IRA mentioned in the previous step.
The important part here is to ensure that the transfer of assets is a “direct transfer” or a “trustee-to-trustee” transfer. This ensures that you don’t receive plan assets directly, and they are instead sent to the provider that handles your Roth IRA. In an ideal rollover process, you shouldn’t receive a check, and the money should simply transfer electronically from your previous employer’s Roth 401(k) plan to your Roth IRA.
In the event that you do receive a check for the balance of your Roth 401(k), but the check is made out to your new provider for your benefit, you still are in the realm of direct rollovers. All you’ll need to do is forward the check along to your new provider via mail or mobile deposit, and they will deposit it for you into your new account.
If you receive a check and it’s made out to you as an individual, we enter the land of indirect rollovers. While it’s not the preferred way to complete a 401(k) rollover, it’s still possible to accomplish your rollover this way. If you do receive a check for your 401(k) balance, you’ll need to deposit the money to a bank account and then transfer the entire amount to your chosen Roth IRA provider within 60 days; if you fail to do this, and you’re under 59.5, you may be liable You’ll likely face a 10% federal penalty tax plus taxes on the earnings of your contributions.
Remember to ensure that the entire amount of your Roth 401(k) must find its way to your new Roth IRA within 60 days if you’ve received a check made out to you!
There will likely be a 1-2 week wait time between when the transfer is initiated and when the funds arrive. The money will usually not transfer “in-kind”, which means your previous investments will likely be liquidated before the funds are sent to your new provider.
A common pitfall for people that go through this process is that they’ll see the funds arrive in their Roth IRA, and think that the process is complete. It is not.
You’ll need to go into the account and actively invest the account balance, ideally in the context of all of the accounts you have. Keep in mind that Roth IRA contributions are subject to income limits established by the IRS.
When you’ve completed this step, you’re done! You now have a tax-exempt Roth IRA growing in perpetuity – all with a zero tax liability (assuming all holding period considerations have been met).
Transfer a 401(k) to an IRA Learn how to roll over a traditional 401(k) to an IRA
There are several reasons why you might be considering moving your Roth 401(k) plan.
Among them:
Most 401(k) plans – traditional and Roth alike – are almost certainly going to offer a set of mutual funds for you to choose from. While this is probably suitable for a majority of people, you might want to invest in other investment options, like individual stocks, ETFs, or even alternative assets like crypto. For this reason, some people roll their Roth 401(k) over to a Roth IRA account at an outside provider to take advantage of more investment choices and continue tax-free growth of your retirement savings.
There are legacy 401(k) plans that charge higher-than-market rates to administer their underlying accounts. This is something to be explored in your former employer’s plan documents, but these fees can come in the form of “administrative” or “management” expenses. While the fees may not be particularly significant in any one year, they do add up over time. IRAs are generally free of these
fees, especially if you use an online brokerage platform.
As life goes on and your financial assets expand, there is a tendency for things to become scattered and overly complex. This could mean many accounts at several different institutions, each with various investments – some of which may be redundant and/or outdated. Rolling over your Roth 401(k) to a Roth IRA is one way to consolidate and make things a bit easier to manage.
Keeping an old Roth 401(k) under the umbrella of your previous employer may not be something with which you’re comfortable. Moving your Roth 401(k) is a way of breaking away completely and becoming a more independent entity from a personal finance standpoint. While this may not be a reason for everyone, it can play a role in your decision-making process.
Rolling over your Roth 401(k) simply means moving the account to another institution; in the majority of cases, you’ll never receive the money directly. A properly completed rollover should involve no early withdrawal penalties or taxes from the IRS. If you’re unsure about the type of account you have, it may be best to speak with a financial advisor or a tax advisor to avoid any unnecessary tax implications.
Transfer a 401(k) to a Roth IRA Learn how to roll over a traditional 401(k) to a Roth IRA
Conversely, there are a few reasons why a rolling over or transferring your Roth 401(k) to a Roth IRA may not be the best option for you. These options include:
If you’re happy with your old Roth 401(k), you may want to leave it where it is. Primarliy, if you don’t have any concerns about your investment options and your account fees are reasonable, then a rollover may not be worth it. It’s important to think long-term, however, and you may find it difficult to keep track of your Roth 401(k) assets as you progress through you career. You’ll also want to make sure you periodically check that your old employer keeps the same 401(k) provider.
Remember that IRAs don’t offer loan provisions like your Roth 401(k) likely does. Not all plan rules allow for it, so you want to confirm with your plan administrator if this is an option first.
The Rule of 55 is an IRS exception that can allow you to withdraw your retirement savings from your Roth 401(k) account at the age of 55 or older without the typical 10% penalty. You may want to consider discussing retirement planning with a qualified financial advisor who can help you navigate tax diversification options, early withdrawal penalties
Roll over to a Roth IRA in just a few minutes.
Capitalize is an online service that helps you digitally locate your Roth 401(k) and pairs you with an expert who manages the entire process of rolling over your 401(k) into a Roth IRA of your choice for you – for free. This can save you hours of your time and spare you the headache of going through the antiquated rollover process. Capitalize is a great option for you if you’re busy or unsure about how to approach the Roth 401(k) rollover process yourself.
As you progress through your career, it can be hard to keep track of where your retirement accounts are. Capitalize can help you find your Roth 401(k) by using your Social Security number. The process is quick and only requires some basic information to help you locate your Roth 401(k) online.
Capitalize can manage the entire Roth 401(k) to Roth IRA rollover process for you – for free. It just takes three simple steps to get started. First, you’ll tell us where your 401(k) is. If you don’t know, you can tell us the company you worked for and we can locate it for you. Next, you’ll pick a Roth IRA rollover provider that works best for you. From there, we’ll contact your Roth 401(k) provider and handle the rest. We can also help with traditional 401(k) to IRA rollovers and traditional 401(k) to Roth IRA rollovers.
Start your Roth 401(k) to Roth IRA rollover in just a few minutes.
Rolling over your Roth 401(k) to a Roth IRA might feel like a daunting exercise, though you’ll most likely find that it’s easier than you thought.
It’s important to understand the rollover process before attempting to go through with transferring your retirement accounts, as you’ll have much more confidence along the way. Also, recall that an IRA rollover is not the same as an IRA contribution. If you choose to move money to an IRA via rollover, this will not count against your annual IRA contribution limits.
It’s great to keep in mind that the rollover process, in the end, is worth it – especially when it comes to Roth accounts with added tax diversification benefits. Roth IRAs are particularly powerful retirement vehicles, and you can enjoy the psychological benefits of knowing that qualified distributions are tax-free withdrawals (they don’t impact your taxable income) and are penalty-free. Also, a Roth IRA doesn’t carry any required minimum distributions (RMDs) during your lifetime.
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