Finish any last transfer steps
Chances are that by this stage you’re done, and your 401(k) provider has initiated the process of rolling over your 401(k) into your new IRA. If so, congrats on getting to the finish line!
But there can sometimes be a small extra step at this stage. That’s because some 401(k) providers will only make distributions of your 401(k) funds to you, not to your new IRA provider. If that’s the case then they’ll send a check with your money to your mailing address. It’s then up to you to forward that check to your new IRA provider using the mailing details that you’d previously looked up. If you’re working with a financial advisor, you may want to discuss retirement investment options and allocations for your rollover.
How long do I have to forward the check?
You should forward the check you get right away. Even if the check is made out to your IRA provider (and thus not an “indirect rollover”), you should try to do it within 60 days of receiving it. This helps make the transfer free of any tax implications or an early withdrawal penalty (commonly known as “cashing out”). A 10% early withdrawal penalty can be incurred if you don’t transfer the money into your rollover account within that 60-day window, and face additional federal tax implications, and potentially other state tax penalties. For more information, consult a local tax professional.
What if my check gets misplaced or lost in the mail?
This unfortunately does happen every once in a while, but don’t worry — your money hasn’t disappeared. If your check doesn’t arrive, then you’ll have to call your 401(k) provider again and ask them to issue a new one.
They’ll place a stop on the first one, and nobody will be able to cash the first (lost) check since it’s generally made out to you or your IRA provider and will always stipulate that it’s “for the benefit of” or FBO, your name.