How To Begin The 401(k) Rollover Process
If you’ve decided that a 401(k) rollover is right for you, read on to learn how to make it happen.
1. Choose the account type you want
Your first decision has already been made: you’ve decided to roll over your 401(k). The next choice is the type of account to which you’ll transfer their funds.
Assuming you’re working with a tax-deferred 401(k) (and not a Roth 401(k)), your two realistic choices for rollover accounts are either your current tax-deferred 401(k) or a rollover IRA of your choice. This choice is heavily influenced by both your desired investment options and the costs associated with each account.
Be careful to evaluate your options. Consider the following questions:
- How does my new employer’s plan compare to the T. Rowe Price 401(k) plan?
- Do I want investment options beyond just mutual funds?
- Does my new employer’s plan accept roll-ins from outside providers?
- Would a new IRA provider offer ancillary services I value?
No matter which option you choose, if you’re working with pre-tax money, you’ll be subject to Required Minimum Distributions (RMDs) when you reach your early 70s. If you’re not sure how to choose an appropriate account type, or if you’re having trouble comparing options, we’re here to assist with big decisions like these.
2. Activate your account
Once you’ve made a choice about which account will receive the funds, make sure it’s activated and that you have the account type and account number available.
This information will come in handy later when you contact T. Rowe Price and request a rollover of your old 401(k) plan.
3. Start the rollover process
When you’re ready to initiate the rollover, contact T. Rowe Price (formally T. Rowe Price Investment Services, Inc.) and first have them locate your old 401(k) plan. To retrieve it, they may need certain pieces of identifying information, like:
- Your name, address, and former employer’s name
- Your old 401(k) plan account number and exact plan name (available on monthly or quarterly statements)
- The tax status of your old 401(k) plan (tax-deferred or after-tax)
- Your Social Security Number
- Your date of birth
There are two main options for transferring funds from T. Rowe Price to your new provider, if applicable. These include direct rollovers and indirect rollovers.
If it’s at all possible, it’s generally advised that a direct rollover is your best option for moving 401(k) funds around.
Direct rollovers simply involve transferring money from one financial institution to another — you never receive the money over the course of the transfer. Only two parties are involved: your old 401(k) plan administrator, and the company receiving the money.
With a direct rollover, your old 401(k) plan is liquidated, and an electronic transfer of funds is sent to the account you specify to T. Rowe Price.
Indirect rollovers, on the other hand, are a bit more complicated. With an indirect rollover, you’ll receive a check made out to you in the mail. The amount will be your entire 401(k) balance less withholding taxes.
You will then need to deposit the entire 401(k) balance, including withholding taxes to a new 401(k) or IRA within 60 days. If you fail to do this, the entire balance will be considered withdrawn, and you’ll be liable for both ordinary income tax as well as an early withdrawal penalty of 10% if you’re under the age 59.5. Whew!
This is why, in the grand majority of cases, we recommend moving money via direct rollover. This helps to avoid any unexpected tax or penalty traps.
4. Keep the process moving
If you’ve elected a direct rollover of your employer-sponsored plan, periodic follow-ups are often necessary to make sure the process is moving along smoothly. This can mean contacting T. Rowe Price to ensure the money has been sent, or it can mean contacting your new provider to make sure they’re on the lookout for an incoming funds transfer. Keep your brokerage account number handy in the event you need to provide it.
An eligible rollover distribution should come with no tax liability attached if you follow the provider’s rules carefully.
If you’ve elected an indirect rollover, you should do everything in your power to make sure the money makes its way to your intended destination account within 60 days. Otherwise, you might find yourself in the midst of an expensive mistake.
When the money finally arrives in your new account, make sure to invest it right away according to your asset allocation.
What if I already have a 401(k) with my new employer?
This a good thing! You can compare your current employer’s 401(k) with your old one to see which one you like better. You can even combine your old 401(k) with your new one if your new plan accepts account roll-ins.
Where do I send my T. Rowe Price rollover check?
Any check you receive should immediately be forwarded on to the new institution you’ve chosen to accept your rollover contribution. Recall that any amounts not re-deposited to an eligible retirement plan within 60 days may be hit with income tax as well as an early withdrawal penalty.
If you’re sending a check to T. Rowe Price, you can send it along with any forms they require to the following address:
T. Rowe Price Retirement Plan Services, Inc.
P.O. Box 17215, Baltimore, MD 21297-1215
What is the minimum amount to open a T. Rowe Price rollover IRA?
There is no minimum to open a T. Rowe Price rollover IRA. Some T. Rowe Price mutual funds may have asset minimums to start investing, but you can still contribute or roll over money to a T. Rowe Price IRA in any amount
Get Help With Your T. Rowe Price 401(k) Rollover
Rolling over a 401(k) can have many benefits, including expanded investment options, greater control over your finances, and potentially lower fees.
There are many advantages to working with a partner to manage the process — especially if you’re having trepidation around moving money or finding it difficult to make a decision for your rollover. That’s where Capitalize comes in.
We’ve helped thousands of job-changers move their old retirement plans and take control of their finances. If you want to skip the hassle of doing the rollover yourself, click here to have our team of experts manage your rollover from start to finish.
If you have more extensive questions, don’t be afraid to consult a qualified income tax advisor or other credentialed tax professional and ask for help.