If you have changed jobs – one, two, or more times since graduating college – then it is likely that you have one, two or more 401(k) plans floating out there.
This situation falls in the category of “good problems” to have. It means that you actively contributed to your 401(k) plan and took advantage of your company’s matching program – so congrats on your investing discipline and for not leaving money on the table!
However, there are a few big reasons you don’t want to let your former 401(k) plans linger for too long.
First, you’re losing some of that money you worked so hard to build up with each month you let your last 401(k) languish. That’s because part of your funds are getting eaten up by management fees. Depending on how much your last employer was contributing to your match, you could be at risk of wiping out all those extra dollars if you let the fees linger too long.
Second, successful investing hinges on having a long-term investment strategy, and the discipline to stick to it over time. If you opened up two or three different 401(k) plans over the course of several jobs, then you likely have several completely distinct portfolios. That’s not how “diversification” is defined in the investing world! As a general rule, you’re better off pooling your available assets and applying a unified strategy that properly diversifies them to achieve your desired balance of growth vs. stability in times of market volatility.
But don’t panic! There’s an easy solution: simplify your retirement planning and take the next step in your wealth accumulation journey by combining your 401(k) assets into one Rollover IRA account.
1. After selecting “Get Started,” complete the brief questionnaire about your goals for the investment and choose “Rollover IRA” as the account type.
2. When asked how you plan to fund the account, choose “Transfer from an outside retirement account.”
3. At this point, your MAP IRA account is set up. Make note of your account number, as you will need it to complete the 401(k) rollover.
4. Next, contact your former employer’s HR or 401(k) plan administrator to request a “direct rollover” of your 401(k). They will take your authorization over the phone or may request that you complete their paperwork. By requesting a “direct rollover,” your former employer will deposit the funds directly into your Schwab Rollover IRA account by wire or check. As a result, you will not be taxed on them at distribution.
Here are the details to provide to your former employer/plan administrator:
Make the check payable to “Charles Schwab & Co. Inc FBO (YOUR NAME)”
On the memo line, write: your account number
Mail check to: Charles Schwab & Co., Inc., P.O. Box 628291, Orlando, FL 32862-8291.
If you have contributed to a Roth 401(k) instead of, or in addition to, a traditional 401(k), then you can follow the same instructions above; but, when asked for your account type, choose “Roth Contributory.” Pre-tax contributions should be kept separate from after-tax contributions.
Your journey awaits, and we’re here to help with the next step.
Past performance is no guarantee of future performance, and CornerCap’s strategies, like most investment strategies, involve the risk of loss. You should not assume that future performance results will be profitable or equal to CornerCap’s past performance.
Whether you’re among the growing number of women leading from the C-suite or are on track to be the #GirlBoss of tomorrow, consider Merriweather your financial future’s bestie. A planner at heart, Merriweather has a special interest in helping professional women who are working to accumulate wealth independently and want to map out financial visions focused on early retirement – on their unique terms.