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Perform a 401(k) Rollover to an IRA in 4 Simple Steps

Updated on August 8, 2022

If you’ve ever changed jobs, you might still have an old 401(k) tied to your previous employer. Many people wind up leaving their 401(k)s behind as the process of transferring (or “rolling over”) your 401(k) can be time-consuming and confusing.

It’s our mission to make 401(k) rollovers easy, and we’ve built a service to handle the entire process for you online – for free!

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Interested in how it works? We’ve broken down the 401(k) rollover process into 3 simple steps:

What are the steps to do a 401(k) rollover?

Step 1: Track down your old 401(k) accounts

In order to process your rollover, we’ll need to know a couple things:

  1. Where’s your 401(k)? We’ll need to know the financial institution where your 401(k) account is located. This institution is often referred to as your “401(k) provider”. If you don’t know, no worries! We can find your old 401(k) based on your previous employer.
  2. Do you have a Traditional or Roth 401(k)? This will determine which type of IRA you’ll need to open (see step 2). The vast majority of people have a traditional 401(k). Only 15% or so of 401(k) plans even offer a Roth choice, but it’s worth checking.

Step 2: Decide how to handle your 401(k) rollover

There are several options when it comes to moving funds in an old 401(k) plan.
You can choose to:

  • Leave the plan with your old employer
  • Roll the money into your new company’s 401(k) plan
  • Remove the cash and face early withdrawal penalties
  • Roll over funds into an IRA

There are pros and cons to each choice. Yet most people who move their 401(k) assets transfer their 401(k) funds into an Individual Retirement Account, or IRA.

Step 3: Open an IRA to receive 401(k) money

Already have an IRA? Great — skip this step

There are a few options you have with an old 401(k), but most people who move their 401(k) assets transfer their 401(k) funds into an Individual Retirement Account, or IRA.

When choosing an IRA, you’ll want to decide whether you prefer to pick your investments yourself, or have them managed for you. Some IRA providers focus on managing your assets for you, while others let you open an account and pick investments yourself.

Once you’ve decided on a provider, you’ll want to open an IRA that matches the ‘tax-type’ as your 401(k) in order to avoid paying any unnecessary taxes:

  • If you have a Traditional 401(k), your contributions came out of your paycheck with no taxes paid. That means you’ll need to move that money into a Traditional or Rollover IRA to avoid unnecessary taxation.
  • If you have a Roth 401(k), your contributions were post-tax, so you’ll want to transfer them into an equally tax-favored Roth IRA.

Need help choosing an IRA? Capitalize can help you compare providers so you pick an IRA that suits your needs as part of our 401(k) rollover service.

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Step 4: Authorize your 401(k) IRA rollover

Once you have your IRA open, you’ll need to instruct your 401(k) provider to send your 401(k) money over. This part can be tricky and varies depending on who your 401(k) provider is. Some institutions require you to fill out a form, others require a phone call with you and most will physically mail you a check to forward on to your new IRA provider. If you don’t know your way around these processes, you risk losing a ton of time and possibly failing at getting your money transferred.

Where can you get help with a 401(k) rollover to an IRA?

The good news is, we’ve got a team of experts ready to assist with your 401(k) rollover. Our agents will guide you through the entire process and assist along the way if you have any questions or concerns.

It’s 100% free for you, and most of the process can be done online in just a few minutes.

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