How do you transfer a 401k to an IRA?

By Financial Advisor Hans Smith

What should you do with your 401k when you change jobs?

After leaving a job, you have the option to complete a "direct rollover" of your workplace 401k or 403b into an Individual Retirement Account (IRA). This is something that we can assist with, as it typically requires some light paperwork or a phone call.

401k and 403b "direct rollovers" are not taxable events, and there are no penalties if executed correctly. You will continue receiving the benefits of tax-deferral in your personal IRA.

One important advantage of a personal IRA is having increased investment flexibility when compared to a workplace retirement plan. Many 401k and 403b plans offer a limited menu of mutual funds, and sometimes do not have the investment options available to build a truly diversified low-cost portfolio.

Mutual funds inside of 401k and 403b plans often have high expense ratios associated with them. This is on top of record keeping and administrative fees that grind away at investment returns over time. Transferring assets from a 401k into a personal IRA gives you the ability to invest in a variety of low-cost diversified index funds, and eliminates record keeping and administrative fees.

A personal IRA can be a great place to consolidate retirement assets every time you switch jobs. Consistently rolling over your 401k and 403b plans into a single IRA reduces unnecessary financial account complexity over time.¹

How we can help:

One Day In July can manage your personal IRA using a variety of low-cost index funds. We will help you build a portfolio that matches your goals and personal risk tolerance. Client portfolios are constructed using diversified low-cost index funds produced by Vanguard and iShares.

Individual Retirement Accounts that we manage for clients are held at Charles Schwab. Clients have online access to their Schwab accounts, and we are able to make investment selections for you using the Schwab Independent Advisor Platform.

Contact us for help moving a prior workplace 401k, 403b, or 457b plan to an IRA:
Hans Smith | (802) 829-6899 | hans@onedayinjuly.com

¹ The decision to rollover a workplace retirement plan into a personal IRA account should be considered on a case by case basis, as it may not always be the most prudent choice, depending on the specific facts and circumstances of the case.